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Debt Relief and Adjustment Incentives: A Theoretical Exploration

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  • International Monetary Fund

Abstract

The purpose of this paper is to analyze the argument that debt relief would increase the incentive of a debtor country to make an adjustment effort (to invest) and that for this reason creditors may benefit by granting relief. It is shown that there are actually opposing incentive effects of debt relief and that the argument could be valid in particular circumstances. A distinction is made between exogenous and endogenous relief, the latter compelled by low capacity to pay caused by low investment earlier.

Suggested Citation

  • International Monetary Fund, 1988. "Debt Relief and Adjustment Incentives: A Theoretical Exploration," IMF Working Papers 1988/036, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1988/036
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    Citations

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    Cited by:

    1. Nunnenkamp, Peter, 1989. "Bank lending to developing countries in the 1980s: an empirical test of major hypotheses on voluntary and involuntary lending," Kiel Working Papers 354, Kiel Institute for the World Economy (IfW Kiel).
    2. Nunnenkamp, Peter, 2002. "Why economic growth trends differ so much across developing countries: the globalization debate and its relevance to Pakistan," Kiel Working Papers 1091, Kiel Institute for the World Economy (IfW Kiel).
    3. Nunnenkamp, Peter, 1989. "Voluntary and involuntary lending : a test of major hypotheses," Policy Research Working Paper Series 193, The World Bank.

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