Loans or Grants?
Published By: UNU-WIDER on eSS | Published Date: November, 25 , 2007In this paper they argue that cancelling the debt of the poorest countries was a good
thing, but that it should not imply that the debt instrument should be foregone. Debt and
debt cancellations are indeed two complementary instruments which, if properly
managed, perform better than either loans or grants taken in isolation. The core of the
intuition, which they develop in a simple two-period model, relates to the fact that the
poorest countries are also the most volatile, so that contingent facilities, explicitly
incorporating debt cancellation mechanisms, are a valuable instrument. [Discussion Paper No. 2007/06]
Author(s): Daniel Cohen, Pierre Jacquet, Helmut Reisen | Posted on: Nov 25, 2010 | Views(721) | Download (645)