The Millennium Development Goals and Sovereign Debt Write-Downs
University of Warwick - Department of Economics; University of London, Queen Mary - Department of Economics
University of Saint Andrews
CDMA Working Paper No. 07/18
Can sovereign debt write-downs be used to achieve the Millennium Development Goals (MDGs)? This paper shows that transparency of domestic governance determines how a sovereign debt write-down is structured to attain the MDGs. When domestic governance is transparent, an unconditional debt write-down enhances non-elites' welfare. Without such transparency, conditions that directly link the debt write-down to public goods that improve non-elites' welfare are required. In the latter case, in a dynamic setting, the debt write-down also has to be directly linked to the amount of new debt issued. Using our formal analysis, we evaluate the efficacy of the current debt relief initiatives and discuss some policy implications.
Number of Pages in PDF File: 20
Keywords: Debt Write-down, Representativeness, Transparency, Conditionality, Millennium Development Goals
JEL Classification: C72, C78, D82, F34working papers series
Date posted: November 1, 2007
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