Working Paper: NBER ID: w10230
Authors: Serkan Arslanalp; Peter Blair Henry
Abstract: Debt relief is unlikely to stimulate investment and growth in the world's highly indebted poor countries (HIPCs). This is because the HIPCs do not suffer from debt overhang. The principal obstacle to investment and growth in the world's poorest countries is a lack of basic economic institutions that provide the foundation for profitable economic activity. If the goal is to help poor countries build the institutions that best suit their development needs, then the energy and resources currently devoted to the HIPC initiative could be more effectively employed as direct foreign aid.
Keywords: No keywords provided
JEL Codes: F3; F4; E6; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| debt relief (F34) | investment and growth in HIPCs (O16) |
| lack of basic economic institutions (O17) | investment in HIPCs (O16) |
| debt overhang (H63) | investment in countries suffering from debt overhang (F34) |
| debt relief (F34) | efficiency and investment in countries suffering from debt overhang (F34) |
| debt relief (F34) | investment growth in Brady countries (O54) |
| economic reforms (E69) | modest improvements in growth rates in HIPCs (O55) |