Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process?

Joshua Hall, Serkan Karadas and Minh Tam Schlosky
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Serkan Karadas: Sewanee, The University of the South, Department of Economics
Minh Tam Schlosky: Sewanee, The University of the South, Department of Economics

No 16-24, Working Papers from Department of Economics, West Virginia University

Abstract: The Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) were created by the IMF and World Bank to help low-income countries reduce their debt burden and to facilitate reaching the Millennium Development Goals. After entering he decision point of the HIPC Initiative stage, countries receive interim aid while following a strategic path to improve their macroeconomic stability via structural reforms. Many countries reached the completion point of the HIPC Initiative stage within a few years, receiving a substantial amount of debt relief. Other countries remained in the interim period for almost a decade. We explore the relationship between the level of corruption in HIPC countries and the length of time between the decision and the completion point. We use survival-time models to estimate the effect of various characteristics of the countries on the probability that each country will exit the interim period. The results show that countries with lower corruption and better rule of law complete the HIPC process faster.

Keywords: debt relief; HIPC; moral hazard; survival time model; foreign aid (search for similar items in EconPapers)
JEL-codes: C41 F34 F35 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2016-12
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Citations: View citations in EconPapers (1)

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Journal Article: Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wvu:wpaper:16-24

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