Effect of Debt Overhang on the Development of Heavily Indebted Poor Countries: Debt Laffer Curve Analysis

• Ahmad, Jamil ^[1] ; Ahmad, Dilshad ^[1] ; Abbas, Mazhar ^[1] ; Ashraf, Muhammad ^[1] ; Salman Shabbir, Muhammad ^[1]
  1. [1] University Islamabad
• Localización: Revista Publicando, ISSN-e 1390-9304, Vol. 5, Nº. Extra 17 (Special Issue - Medical Sciences & Education), 2018, págs. 77-99
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • This study explores that whether the debt financing or debt forgiving would be suitable for the Highly Indebted Poor Countries (HIPCs). Debt Laffer curve theory has been tested in 21 HIPCs by applying price equation of debt, maximized value of debt and price elasticity approach over the period of 1980 to 2016. The maximized value of debt criterion implies that Chad is not eligible for the debt write-off strategy in comparison with the rest of the countries. By applying price elasticity approach, it is observed that only Burkina Faso, Cameroon, Chad, and Republic of Congo are eligible for debt financing while the remaining countries should adopt debt write-off facility. The crux of the study is that overall debt forgiveness is suitable for the HIPCs. Moreover, it is also in the favor of both the creditor countries and various international financial institutions such as World Bank and IMF and HIPCs itself. The study suggests that the creditors should continue to financing along with improving structural policies and institutions of the HIPCs.

• Referencias bibliográficas
  • Boboye, L., & Ojo, M. (2012). Effect of external debt on economic growth and development of Nigeria. International Journal of Business...
  • Chaudhary, M. A., & Awar, S. (2001). Debt Laffer Curve for South Asian Countries. The Pakistan Development Review, 40(4), pp-705.
  • Chaudhary, M. A., Anwar, S., & Tahir, P. (2000). Foreign Debt, Dependency, and Economic Growth in South Asia [with Comments]. The Pakistan...
  • Claessens, S. (1990). The debt laffer curve: Some estimates. World Development, 18(12), 1671-1677.
  • Claessens, Stijn, and Ishac Diwan (1989). Market-Based Debt Reduction. Dealing with the Debt Crisis. Washington, D. C. (World Bank Discussion...
  • Cohen, D. (1989). How to cope with a debt overhang: Cut flows rather than stocks. Dealing with the debt crisis. Washington, D.C.
  • Krugman, P. (1988). Financing vs. forgiving a debt overhang. Journal of development Economics, 29(3), 253-268.
  • Pattillo, C., Poirson, H., Ricci, L., Kraay, A., & Rigobon, R. (2003, January). Through What Channels Does External Debt Affect Growth?...
  • Pattillo, C., Poirson, H., Ricci, L. (2002). External Debt and Growth. Working Paper, 02(69). Washington, DC: International Monetary Fund.
  • Sachs, Jeffrey (1989). Efficient Debt Reduction. Dealing with the Debt Crisis. Washington, D.C. (World Bank Discussion Papers.)
  • Sachs. J., and H. Hizinga (1987). U. S. Commercial Banks and the Developing Countries Debt Crisis, Brookings Papers on Economic Activity....
  • Sichula, M. (2012). Debt overhang and economic growth in HIPC countries: The case of Southern African development community (SADC). International...
  • Sundell, F., Lemdal, M. (2011). Debt Overhang and the Effects on Developing and Developed Economies, Stockholm School of Economics Department...
  • Tatu, Ş. (2014). An application of debt Laffer curve: Empirical evidence for Romania's case. Romanian Journal of Fiscal Policy (RJFP),...