Publications
- Who Gets Debt Relief? (Joint with Aart Kraay, 2007). Journal of the European Economic Association, Vol 5, Issue 2-3.
Abstract: We use preliminary results from an ongoing effort to construct estimates of debt relief to study its allocation across a sample of 62 low-income countries. We find some evidence that debt relief, particularly from multilateral creditors, has been allocated to countries with better policies in recent years. Somewhat surprisingly, conditional on per capita incomes and policy, more indebted countries are not much more likely to receive debt relief. However, countries that are large debtors vis-a-vis especially multilateral creditors are more likely to receive debt relief. We do not find much evidence that debt relief responds to shocks to GDP growth. Finally, most of the persistence in debt relief is driven by slowly-changing country characteristics, indicating that it may difficult for countries to “exit” from cycles of repeated debt relief.
Database (available soon!).
Paper prepared for the invited session “Developing Country Debt Crises” at the European Economic Association Annual Meetings. Vienna, August 24-28, 2006. Presented also at Princeton University, University of Milan and University of Amsterdam.
Working Papers
- What Has 100 Billion Dollars Worth of Debt Relief Done for Low-Income Countries (Joint with Aart Kraay). September 2005.
Abstract: Between 1989 and 2003, low-income countries received $100 billion in debt relief. The stated objectives for much of this debt relief have been to reduce debt overhang and to free up recipient government resources for development spending that would otherwise have been used for debt service. In this paper we empirically assess the extent to which debt relief has been successful in meeting these objectives, using a newly-constructed database measuring the present value of debt relief for 62 low-income countries. We find little evidence that debt relief has affected the level and composition of public spending in recipient countries. We also do not find evidence that debt relief has raised growth, investment rates or the quality of policies and institutions among recipient countries. Although we cannot rule out the possibility that our failure to find evidence of positive impacts of debt relief is due to a variety of data and statistical problems, the evidence reported here does suggest that some skepticism is in order regarding the likely benefits of further large-scale debt relief.
Database (available soon!).
Paper presented at: Princeton University, University of Chicago, Center for Global Development, LACEA 2005, John Hopkins-SAIS, Inter-American Development Bank, World Bank, Spanish Ministerio de Economia y Hacienda Conference, University of Milan, Stockholm School of Economics, Saint Louis University (Madrid Campus), Tilburg University, University of Oxford, and Lund University.
Press Coverage for Debt Relief Research: UK Newspaper The Observer (link)
- The Effects of Conflict on the Structure of the Economy.
Abstract: We study the impact of civil conflict on the economic structure of the economy. Conflict reduces the share of the manufacturing sector in the GDP, increases the exploitation of some simple natural resources (i.e. forestry) and reduces the production of crops. Using industrial level data for developing countries we study the channels through which conflict affects the manufacturing sector. As expected, we find that industries that are more institutional/transaction intensive are the ones that suffer most in conflictive societies. Labour-intensive sectors are also negatively affected by conflict. It is also found that exporting industries and sectors requiring external financing suffer more during conflict. Our results are robust to sensitivity analysis and have implications for post conflict policies.
Policy Papers
Abstract: We review recent trends in the fiscal and debt stance in a sample of highly indebted emerging markets. We found some progress in terms of fundamentals and debt management, what has translated in a reduction in the level of indebtedness and vulnerability in the last few years. However, debt burdens remain high and most of the progresses have taken place in a very favorable international context characterized by abundant liquidity and record commodity prices. We show that improvements in the fiscal position have often been at expenses of reductions in infrastructure investment and delays in the expenditures required to reduce poverty and promote human capital accumulation. This short run strategy makes the transition to lower levels of debt longer and riskier due to the delay in pro growth investments the adjustment imposes. However, in markets often driven more by sentiments than fundamentals, countries seems to not have other option. The international financial institutions need to be part of the solution to the problem of highly indebtedness, not only creating mechanisms to deal with fundamental defaults but also providing the necessary instruments to secure predictable sources of development financing.
- Financial Sector Reforms in Latin America. November 2005.
Abstract: During the 1990s Latin America experienced a wave of financial sector reforms that included the privatization of major state owned banks and the removal of barriers to foreign banks. Using a newly constructed database of financial sector loans of the World Bank and the Inter-American Development Bank we assess the impact of financial sector reforms in credit availability in Latin America during the period 1990-2004. After controlling for the endogeneity of the reform process, we find that foreign bank participation on average improves access to credit for companies of all sizes. In contrast, state ownership appears to have a negative impact in access to credit in Latin America. The results confirm the findings in previous studies. Further research is needed however to evaluate the effect the reforms had in the stability of the banking sector and in its long run efficiency.