Working Paper: NBER ID: w9369
Authors: Serkan Arslanalp; Peter Blair Henry
Abstract: The stock market appreciates by an average of 60 percent in real dollar terms when countries announce debt relief agreements under the Brady Plan. In contrast, there is no significant increase in market value for a control group of countries that do not sign agreements. The results persist after controlling for IMF agreements, trade liberalizations, capital account liberalizations, and privatization programs. The stock market revaluations forecast higher future net resource transfers and GDP growth. While markets respond favorably to debt relief in the Brady countries, there is no evidence to suggest that current debt relief efforts for the Highly-Indebted Poor Countries (HIPCs) will achieve similar results.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Debt relief response (F34) | Not attributed to concurrent IMF programs or economic reforms (F69) |
| Significant appreciation of stock markets in debtor countries (F34) | Higher future net resource transfers and GDP growth (F16) |
| Announcement of debt relief agreements under the Brady Plan (F34) | Significant appreciation of stock markets in debtor countries (F34) |