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Low Income Countries, Credit Rationing and Debt Relief: Bye bye international financial market?

Author

Listed:
  • Marc Raffinot

    (LEDa, UMR DIAL-Paris-Dauphine)

  • Baptiste Venet

    (PSL, Université Paris-Dauphine, LEDa, UMR DIAL)

Abstract

(english) Low Income Countries (LICs) have a very limited access to international financial markets. Since the 90's, LICs have been granted debt relief by bilateral creditors and by international financial institutions. Did those debt relief initiatives send a negative message to the lenders, deterring them to lend to the LICs? For assessing this we use a new extended concessionality rate of financing flows. We assess the impact of debt relief on this concessionality rate implementing a Granger causality test using panel data, a methodology perfected by Hurlin (2004, 2005), Hurlin and Venet (2004) and Dumitrescu and Hurlin (2012). We show that for the 28 LICs of our panel, there is a robust causal relationship from debt relief to the concessionality rate of financing flows (either positive or negative). The reverse causality is also significant, but to a lesser extent. _________________________________ (français) Les pays à faible revenu (PFR) ont un accès très limité au marché financier international. Depuis la fin des années 90, la plupart des PFR ont bénéficié de réductions de dette de la part de leurs créanciers bilatéraux et multilatéraux. Ces réductions de dette ont-elles envoyé un signal négatif aux prêteurs, qui les auraient détournés de prêter à ces pays, ou, au contraire, un message positif d’accroissement de la capacité à rembourser ? Pour analyser ceci, nous utilisons un nouveau taux de concessionalité élargi, et une nouvelle base de données sur les réductions de dette en termes d’encours. Nous effectuons un test de Granger en panel, une méthode mise au point par Hurlin (2004, 2005), Hurlin et Venet (2004) et Dumitrescu et Hurlin (2012). Nous montrons que pour les 28 PFR de notre panel, les réductions de dette ont un impact significatif (positif ou négatif) sur le taux de concessionalité élargie. La causalité inverse est aussi significative, mais dans une moindre mesure.

Suggested Citation

  • Marc Raffinot & Baptiste Venet, 2013. "Low Income Countries, Credit Rationing and Debt Relief: Bye bye international financial market?," Working Papers DT/2013/03, DIAL (Développement, Institutions et Mondialisation).
    • Handle: RePEc:dia:wpaper:dt201303
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    References listed on IDEAS

    as
    1. Christophe Hurlin, 2005. "Un test simple de l'hypothèse de non-causalité dans un modèle de panel hétérogène," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 799-809.
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    More about this item

    Keywords

    Debt relief; Low Income countries; Causality in panels; Access to the financial market; concessionality; Réduction de dette; Pays à faible revenu; causalité en panel; accès au marché financier; concessionalité.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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