Debt Forgiveness and Sovereign Credit Ratings in Developing Countries

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Abstract/Contents

Abstract: Although debt forgiveness for developing countries has claimed an increasingly prominent role in development policy, its efficacy remains in question. This study examines one particular goal of debt forgiveness: encouraging external investment by easing the incentive problems associated with large debt stocks. I assess the impact of debt forgiveness on creditor sentiments, using Institutional Investor sovereign credit ratings as a proxy for creditor outlook. Using a dataset of a broad sampling of developing countries over the last twenty-five years, I find that although large external debt stocks have a significant negative effect on credit ratings, debt forgiveness has not had any significant impact in improving them, likely as a consequence of significant reborrowing by developing countries and larger aid flows outside of debt forgiveness.

Type of resource	text
Date created	May 2007

Author	Rao, Vilas
Primary advisor	Taylor, John B.
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	Debt forgiveness
Subject	debt relief
Subject	sovereign credit ratings
Genre	Thesis

Location	https://purl.stanford.edu/qh045ft8897

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Preferred Citation: Rao, Vilas. (2007). Debt Forgiveness and Sovereign Credit Ratings in Developing Countries. Stanford Digital Repository. Available at: https://purl.stanford.edu/qh045ft8897

Stanford University, Department of Economics, Honors Theses

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