Debt relief and good governance: new evidence of developing countries for the period 1990-2013
Applied Econometrics and International Development , 19:1, 15–32 (2019)
After the introduction of the HIPC Initiative in the early 2000s, indebted LICs had to show a decent governance performance before their debts were forgiven. We discuss the hypothesis that during the follow-up initiatives debt relief decisions refrained from this policy. We test different political economy theories by applying dynamic panel models to a set of debtor countries. We demonstrate that improvements in governance quality led to higher levels of debt forgiveness in 2000-2004, but not in the subsequent periods.
Keywords: Debt relief, Institutions, HIPC Initiative, MDRI, Governance