Loans o Grants?

Daniel Cohen and Helmut Reisen

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: We argue in this paper that canceling the debt of the poorest countries was a good thing, but that it should not imply that the debt instrument should be foregone. Debt and debt cancellations are indeed two complementary instruments which, if properly managed, perform better than either loans or grants taken in isolation. The core of the intuition, which we develop in a simple two-period model, relates to the fact that the poorest countries are also the most volatile, so that contingent facilities, explicitly incorporating debt cancellation mechanisms, are a valuable instrument.

Date: 2007
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Citations: View citations in EconPapers (17)

Published in Review of World Economics, 2007, 143 (4), pp.764-782. ⟨10.1007/s10290-007-0131-y⟩

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Working Paper: Loans or Grants? (2010)
Working Paper: Loans or Grants (2007)
Working Paper: Loans o Grants? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754255

DOI: 10.1007/s10290-007-0131-y

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