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Official Debt Restructurings and Development

Gong Cheng (), Javier Díaz-Cassou and Aitor Erce ()

No 339, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: Despite the frequency of official debt restructurings, little systematic evidence has been produced on their characteristics and implications. Using a dataset covering more than 400 Paris Club agreements, this paper fills that gap. It provides a comprehensive description of the evolving characteristics of these operations and studies their impact on debtors. The progressive introduction of new terms of treatment gradually turned the Paris Club from an institution primarily concerned with preserving creditors? claims into an instrument to foster development in the world?s poorer nations, among other objectives. Our study finds that more generous restructuring conditions involving nominal relief are associated with an acceleration of per capita GDP growth, a reduction of poverty and inequality, and an increase in public health budgets. We also find that countries receiving nominal relief tend to receive lower aid flows subsequently, the opposite being the case for countries receiving high reductions in the net present value of their obligations, but no nominal haircuts.

Keywords: Official debt; sovereign debt restructuring; Paris Club (search for similar items in EconPapers)
JEL-codes: F33 F34 F36 F53 H63 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018-04-20
New Economics Papers: this item is included in nep-dev
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:339

DOI: 10.24149/gwp339

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