Abstract
The argument that debt relief would increase the incentive of a debtor country to make an adjustment effort (to invest) and that for this reason creditors may benefit by granting relief is analyzed in this paper. It is shown that there are actually opposing incentive effects of debt relief and that the argument could be valid in particular circumstances. A distinction is made between exogenous and endogenous relief, the latter compelled by low capacity to pay caused by low investment earlier.
Similar content being viewed by others
Rights and permissions
About this article
Cite this article
Corden, W. Debt Relief and Adjustment Incentives. IMF Econ Rev 35, 628–643 (1988). https://doi.org/10.2307/3867113
Published:
Issue Date:
DOI: https://doi.org/10.2307/3867113