Comparative fiscal response effects of debt relief: an application to African HIPCs

bibliographic database
Line

Periodical article

Title:	Comparative fiscal response effects of debt relief: an application to African HIPCs
Authors:	Cassimon, Danny Van Campenhout, Bjorn
Year:	2008
Periodical:	South African Journal of Economics
Volume:	76
Issue:	3
Pages:	427-442
Language:	English
Geographic term:	Subsaharan Africa
Subjects:	debt relief fiscal policy
External link:	https://doi.org/10.1111/j.1813-6982.2008.00201.x
Abstract:	As part of the efforts of the international donor community to scale up aid to Africa, substantial debt relief has been granted in recent years through the Heavily Indebted Poor Countries (HIPC) Initiative and its successor, the Multilateral Debt Relief Initiative (MDRI). The authors assess, for a sample of 24 African countries that have at least reached decision point status in the HIPC Initiative, to what extent this debt relief has created fiscal space in recipient country budgets, and what, on average, the actual fiscal response effects have been, relative to other types of aid. Inspired by the fiscal response literature, they model public finance behaviour as a system of structural equations and estimate the reduced form parameters in a Vector Autoregressive framework. In general, the authors are unable to find evidence that debt relief might provoke no or even perverse fiscal responses. On average, debt relief affects public finance behaviour in a desired way, with effects being most similar to those of its most direct substitute, programme grants. Bibliogr., notes, ref., sum. [Journal abstract]