Helping the Poor to Help Themselves: Debt Relief or Aid?

Serkan Arslanalp and Peter Blair Henry

in Sovereign Debt at the Crossroads

Published in print April 2006 | ISBN: 9780195168006
Published online May 2006 | e-ISBN: 9780199783458 | DOI:
 Helping the Poor to Help Themselves: Debt Relief or Aid?

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This chapter discusses the central economic question of debt relief: does debt relief work to promote economic growth? This seemingly straightforward question — often taken for granted by debt campaigners — merits closer attention to ensure that relief bears constructive and sustainable outcomes. It is argued that debt relief is highly effective at promoting growth in countries suffering from a “debt overhang”, where reducing debt levels will stimulate investment and net resource transfers from abroad, but less effective in countries where infrastructure is weak and where net resource transfers are already positive.

Keywords: debt relief; poor countries; economic growth; debt overhang; developing countries

Chapter.  8825 words. 

Subjects: Economic Development and Growth

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