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Debt Relief and Good Governance: New Evidence

Andreas Freytag (), Jonatan Pettersson and Julian Schmied ()

No 6360, CESifo Working Paper Series from CESifo

Abstract: Since the introduction of the HIPC Initiative in the early 2000s, indebted LICs had to show a decent governance performance before their debts were forgiven. We discuss the hypothesis that during the follow-up, Multilateral Debt Relief Initiative (MDRI), the World Bank has refrained from this policy, and that debt relief decisions are rather politically driven. We test different political economy theories by applying panel models to a set of debtor and creditor countries, respectively. Our main finding shows, that improvements in governance quality led to higher levels of debt forgiveness in 2000-2004, but not in the subsequent periods.

Keywords: debt relief; World Bank; MDRI; HIPC; political economy; development aid (search for similar items in EconPapers)
JEL-codes: O20 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-dev
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Working Paper: Debt Relief and Good Governance: New Evidence (2016) Downloads
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