Debt Relief and Credit to the Private Sector in African Countries

:  The purpose of the paper is to empirically investigate the link between debt relief and credit to the private sector in African countries using a panel method over the period 1988–2004. The motivation for investigating the relationship between debt relief and credit to the private sector follows...

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Bibliographic Details
Published in:African development review 2007-12, Vol.19 (3), p.469-480
Main Authors: Harrabi, Sana, Bousrih, Lobna, Salisu, Mohammed
Format: Article
Language:English
Subjects:
Africa
Credit
Credit national
Debt cancellation
Debt relief
Development economics
Economic development
Economic policy
National debt
Private companies
Private sector
Sovereign debt
Studies
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Summary::  The purpose of the paper is to empirically investigate the link between debt relief and credit to the private sector in African countries using a panel method over the period 1988–2004. The motivation for investigating the relationship between debt relief and credit to the private sector follows Christensen's (2004) hypothesis that domestic debt has a negative impact on the credit to private sector; therefore debt relief is expected to alleviate domestic debt and thereby create space for domestic credit, which if it is mostly constituted of public sector credit, crowds out credit to the private sector. The main results of the paper are as follows: (1) debt relief has a significant and positive effect on credit to the private sector in the short term; (2) in the long term, debt relief has positive effects on domestic credit to the private sector only when associated with good initial institutional quality.
ISSN:1017-6772
1467-8268
DOI:10.1111/j.1467-8268.2007.00171.x