Sustainability and External Debt Reduction in Poor Countries

Catholic University of Piacenza Economics Working Paper No. 27

26 Pages Posted: 11 Jun 2005

See all articles by Marco Arnone

Marco Arnone

Centre for Macroeconomics & Finance Research (CeMaFiR); Catholic University of the Sacred Heart of Milan - Institute for Economic Policy

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics; Centre for Macroeconomics & Finance Research (CeMaFiR)

Date Written: February 2005

Abstract

This paper presents a critical approach to the policy debate about external debt sustainability and debt relief in the High Indebted Poor countries (HIPC). The authors look at the different approaches to and models of debt sustainability and claim that a realistic evaluation of this issue requires the use of the fully-fledged government budget constraint, which includes not only the external debt, but also the domestic debt, as well as the balance of payments and the exchange rates. The authors describe the macroeconomic effects of the IMF-World Bank HIPC Initiative, highlighting some of its theoretical limits; the Initiative could not guarantee ex ante external debt sustainability, except by chance. A new operational framework - that takes into account the overall government budget constraint and the feedback of debt relief on economic growth - and a stronger commitment by advanced economies to open up their agricultural markets to support these countries, are required.

Note: Downloadable document is in Italian.

Keywords: External debt, HIPC, debt sustainability, debt reduction, poor countries

JEL Classification: F34, H63, O11, O19

Suggested Citation

Arnone, Marco and Presbitero, Andrea Filippo, Sustainability and External Debt Reduction in Poor Countries (February 2005). Catholic University of Piacenza Economics Working Paper No. 27. Available at SSRN: https://ssrn.com/abstract=705561 or http://dx.doi.org/10.2139/ssrn.705561

Marco Arnone (Contact Author)

Centre for Macroeconomics & Finance Research (CeMaFiR) ( email )

Piazza Mirabello, 2
Milano, 20121
Italy

HOME PAGE: http://www.a-bpfoundation.org

Catholic University of the Sacred Heart of Milan - Institute for Economic Policy ( email )

Via Necchi, 5
20123 Milan
Italy
+39 02 72342921 (Phone)

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli, 8
Ancona, AN 60121
Italy
+39 0712207074 (Phone)

HOME PAGE: http://sites.google.com/site/presbitero/

Centre for Macroeconomics & Finance Research (CeMaFiR) ( email )

Piazza Mirabello, 2
Milan, 20100
Italy

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