Computer Science
4 years ago

Debt relief boosts consumption but hinders investment in low-income countries.

RePEc: Research Papers in Economics
The Dynamic Implications of Debt Relief for Low-Income Countries
Aleš Bulı́ř, Alma Romero-Barrutieta, José Daniel Rodríguez-Delgado

Paper Summary

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Debt relief for low-income countries can lead to more borrowing, spending, and less saving. A study using a model of a small open economy found that expecting debt relief can cause countries to accumulate more debt. In Uganda, debt relief only temporarily reduces debt levels, but leads to higher debt-to-GDP ratios in the long run. This means that debt relief may not always solve the debt problem in low-income countries.