The perceived lack of conclusive quantitative evidence on the macroeconomic effects of debt relief in low-income countries has generally blurred the image of debt relief efforts and left the issues of its effectiveness and efficiency open to debate and dispute. This thesis seeks to shed more light on the subject by providing some further empirical evidence. This objective is achieved by performing an empirical investigation of two effects of debt relief. First, the study examines the debt relief-new borrowing relationship in a multivariable regression framework. The results that emerge suggest that, on average, debt relief can be beneficial in reducing the future new borrowing of Highly Indebted Poor Countries (HIPCs). This conclusion, to some extent, is in line with the goals of HIPCs debt relief initiatives in reducing external debt burdens of those countries to sustainable levels. However, it presents a challenge to the views of William Easterly on the ???perverse incentive effects??? of ???continuing waves??? of debt relief that are said to lead to further debt accumulation of a similar magnitude to replace old cancelled debt. Second, the analysis explores the influence of debt relief on domestic investment behaviour in developing countries. Debt relief is found to have a positive effect on domestic investment in countries with good policy environments. This result suggests that debt relief would be more effective in promoting domestic investment if it were more cautiously conditioned on sound policy frameworks.
| Identifer | oai:union.ndltd.org:ADTP/257209 |
| Date | January 2006 |
| Creators | Elnasri, Amani, Economics, Australian School of Business, UNSW |
| Publisher | Awarded by:University of New South Wales. School of Economics |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Amani Elnasri, http://unsworks.unsw.edu.au/copyright |
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