Aid Effectiveness,Debt Relief and Public Finance Response: Evidence from a Panel of HIPC Countries |
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Authors: | Danny Cassimon Bjorn Van Campenhout |
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Institution: | (1) Institute of Development Policy and Management (IOB), University of Antwerp, p/a Prinsstraat 13, B-2000 Antwerpen, Belgium;(2) Universiy of Antwerp, Antwerpen, Belgium |
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Abstract: | Substantial amounts of debt relief have been granted to a set of low-income countries, as an alternative aid modality. Although
the theoretical case for debt relief is firmly established, only empirical analysis can show whether debt relief is indeed
a (more) effective mode of aid delivery. We investigate the linkages between debt relief and other fiscal variables such as
current expenditure, government investment, taxation and domestic borrowing, in comparison to the effects of grants and concessional
loans. We find that the fiscal impact of HIPC debt relief follows fairly complex dynamics. For example, debt relief initially
reduces government investment, but the effect becomes positive after two years, well outperforming other modes of aid delivery.
JEL no. F34, F35, O11, O19 |
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Keywords: | HIPC debt relief fiscal response aid effectiveness |
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