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The Dynamic Implications of Debt Relief for Low-Income Countries, Ales Bulir, Alma Romero-Barrutieta, Jose Daniel Rodríguez-Delgado

The effects of debt relief on incentives to accumulate debt, consume, and invest are an important concern for donors and recipients. Using a dynamic stochastic general equilibrium model of a small open economy with a minimum consumption requirement and an endogenous relief probability, we show that excessive debt accumulation is consistent with an anticipation of a future debt relief. Simulations of the calibrated model using 1982-2006 Ugandan data suggest that debt-relief episodes are likely to have only a temporary impact on the level of debt in low-income countries, while being associated with more consumption and less invesment. The long-run debt-to-GDP ratio is estimated to be about twice as high with debt relief than without it
Table Of Contents
Cover; Contents; I. Introduction; II. The Debt Problem and the HIPC Initiatives; A. The Ugandan Experience with Debt Relief; III. The Model Economy; A. Environment; B. Technology; C. Preferences; D. The Debt-Relief Mechanism; E. The Household Problem; F. Rational Expectations Equilibrium and its Recursive Representation; IV. Simulation Results; A. Calibration; B. The Debt-Relief Scenario; C. The Scenario Without Debt Relief; D. Welfare Implications; V. Policy Experiments; A. The Debt-Relief Mechanism Responding to the Debt-to-GDP Ratio Only
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (28 p.)
Specific Material Designation
Form Of Item

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