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The political economy of the enhanced HIPC-initiative

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  • Michaelowa, Katharina

Abstract

Only three years after its initial endorsement by the World Bank and the IMF in 1996, the Heavily Indebted Poor Country (HIPC) - Initiative was considerably altered and enhanced. How did this change come about? Neither developments in economic theory, nor empirical evidence of changed beneficiary behavior can explain the usefulness of this policy shift. The merits of a shift from ex-ante conditionality to process conditionality implied by the link of HIPC debt relief to the elaboration of Poverty Reduction Strategy Papers (PRSP) remain equally unclear. However, the change from the initial to the Enhanced HIPC-Initiative can easily be explained as a result of utility maximization behavior by national and international bureaucrats, politicians and NGO. A politico-economic model suggests that the overall rise of HIPC default risk and the symbolic value of the year 2000 have been the two major determinants of the policy shift.

Suggested Citation

  • Michaelowa, Katharina, 2002. "The political economy of the enhanced HIPC-initiative," HWWA Discussion Papers 161, Hamburg Institute of International Economics (HWWA).
    • Handle: RePEc:zbw:hwwadp:26208
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    References listed on IDEAS

    as
    1. Daniel Cohen, 2001. "The HIPC Initiative: True and False Promises," International Finance, Wiley Blackwell, vol. 4(3), pages 363-380.
    2. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    3. Michaelowa, Katharina, 2003. "The Political Economy of the Enhanced HIPC-Initiative," Public Choice, Springer, vol. 114(3-4), pages 461-476, March.
    4. Gordon  Menzies, 2000. "Debt Forgiveness: The Case for Hyper-Incentive Contracts," Economics Series Working Papers 37, University of Oxford, Department of Economics.
    5. Birdsall, Nancy & Diwan, Ishac & Claessens, Stijn, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," CEPR Discussion Papers 3297, C.E.P.R. Discussion Papers.
    6. Howard White & Oliver Morrissey, 1997. "Conditionality When Donor And Recipient Preferences Vary," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(4), pages 497-505.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Presbitero, Andrea F., 2008. "Debt Relief Effectiveness and Institution Building," MPRA Paper 12597, University Library of Munich, Germany.
    2. Anwar, Mumtaz, 2005. "The Political Economy of International Financial Institutions? Lending to Pakistan," HWWA Discussion Papers 338, Hamburg Institute of International Economics (HWWA).
    3. Sanford, Jonathan E., 2004. "IDA Grants and HIPC Debt Cancellation: Their Effectiveness and Impact on IDA Resources," World Development, Elsevier, vol. 32(9), pages 1579-1607, September.
    4. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.
    5. Carsten Hefeker & Katharina Michaelowa, 2005. "Can process conditionality enhance aid effectiveness?," Public Choice, Springer, vol. 122(1), pages 159-175, January.
    6. Michaelowa, Katharina, 2003. "The Political Economy of the Enhanced HIPC-Initiative," Public Choice, Springer, vol. 114(3-4), pages 461-476, March.
    7. William Akoto, 2013. "Do countries strategically improve their institutions to access increased debt relief?," Economics Bulletin, AccessEcon, vol. 33(2), pages 1185-1192.
    8. Peter Hjertholm, 2004. "Explaining the Enhanced HIPC Initiative: A Response to Michaelowa (2003)," Public Choice, Springer, vol. 121(3), pages 481-483, February.
    9. Freytag, Andreas & Pehnelt, Gernot, 2009. "Debt Relief and Governance Quality in Developing Countries," World Development, Elsevier, vol. 37(1), pages 62-80, January.
    10. Freytag , Andreas & Pettersson, Jonatan & Schmied, Julian, 2016. "Debt Relief and Good Governance: New Evidence," VfS Annual Conference 2016 (Augsburg): Demographic Change 145914, Verein für Socialpolitik / German Economic Association.
    11. Cordella, Tito & Missale, Alessandro, 2013. "To give or to forgive? Aid versus debt relief," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 504-528.
    12. Þule AKKOYUNLU & Max STERN, 2018. "An empirical analysis of Diaspora bonds," Journal of Economics and Political Economy, KSP Journals, vol. 5(1), pages 57-80, March.
    13. Andreas FREYTAG & Julian SCHMIED, 2019. "Debt Relief And Good Governance: New Evidence Of Developing Countries For The Period 1990-2013," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 19(1), pages 15-32.
    14. Hefeker, Carsten & Michaelowa, Katharina, 2003. "Can Process Conditionality Enhance Aid Effectiveness? The Role of Bureaucratic Interest and Public Pressure," Discussion Paper Series 26389, Hamburg Institute of International Economics.

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    More about this item

    Keywords

    HIPC-Initiative; political economy of aid; international decision making processes;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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