Debt and aid, war and peace: Policy tradeoffs in conflict-affected countries

Menzies, GD

Debt and aid, war and peace: Policy tradeoffs in conflict-affected countries

Menzies, GD

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Publisher:: American University of Sharjah
Publication Type:: Journal Article
Citation:: Review of Applied Economics, 2006, 20 (268), pp. 169 - 179
Issue Date:: 2006-01

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Field	Value	Language
dc.contributor.author	Menzies, GD https://orcid.org/0000-0003-4133-2282	en_US
dc.date.issued	2006-01	en_US
dc.identifier.citation	Review of Applied Economics, 2006, 20 (268), pp. 169 - 179	en_US
dc.identifier.issn	0973-1687	en_US
dc.identifier.uri	http://hdl.handle.net/10453/15737
dc.description.abstract	A creditor can balance debt recovery and humanitarian goals within an optimal contract framework. The approach ties together two strands of literature that assume either creditor self-interest (Krugman 1988) or benevolence (Addison and Murshed 2003). A reservation utility for the debtor serves as a metric for creditor benevolence. The optimal hyper-incentive contract recognizes that the attainment of health, education, peace and the appeasement of foreign creditors may be conflicting goals. Forgiving debt to motivate paying creditors may therefore have the unintended effect of reducing effort devoted to winning a civil war. For a given reservation utility for the debtor, aid directly targeted towards ending a civil war is a substitute for debt forgiveness.	en_US
dc.publisher	American University of Sharjah	en_US
dc.relation.ispartof	Review of Applied Economics	en_US
dc.title	Debt and aid, war and peace: Policy tradeoffs in conflict-affected countries	en_US
dc.type	Journal Article
utslib.citation.volume	268	en_US
utslib.citation.volume	20	en_US
utslib.for	140212 Macroeconomics (incl. Monetary and Fiscal Theory)	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1605 Policy and Administration	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access
pubs.consider-herdc	false	en_US
pubs.issue	268	en_US
pubs.volume	20	en_US

Abstract:

A creditor can balance debt recovery and humanitarian goals within an optimal contract framework. The approach ties together two strands of literature that assume either creditor self-interest (Krugman 1988) or benevolence (Addison and Murshed 2003). A reservation utility for the debtor serves as a metric for creditor benevolence. The optimal hyper-incentive contract recognizes that the attainment of health, education, peace and the appeasement of foreign creditors may be conflicting goals. Forgiving debt to motivate paying creditors may therefore have the unintended effect of reducing effort devoted to winning a civil war. For a given reservation utility for the debtor, aid directly targeted towards ending a civil war is a substitute for debt forgiveness.

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http://hdl.handle.net/10453/15737