A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief

Koeda, Junko

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A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief

IMF Working Paper No. 06/224

24 Pages Posted: 31 Oct 2006

See all articles by Junko Koeda

Junko Koeda

Waseda University - School of Political Science and Economics

Date Written: October 2006

Abstract

The paper presents a theoretical model to explain how debt overhang is generated in low-income countries and discusses its implications for debt relief. The paper indicates that the extent of debt overhang, and the effectiveness of debt relief, would depend on a recipient country's initial economic conditions and level of total factor productivity.

Keywords: debt overhang, debt relief, participation constraint, low-income countries, dynamic programming

JEL Classification: E21, F34, F35, F43, O16, O21

Suggested Citation: Suggested Citation

Koeda, Junko, A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief (October 2006). IMF Working Paper No. 06/224, Available at SSRN: https://ssrn.com/abstract=941286