The Impact Of Debt Waiver On Macroeconomic Performance

This paper examines the association between debt waiver and economic growth for countries with high external debts.The findings reveal that debt waiver has positive and significant impact on economic growth and gross fixed capital formation,using dynamic panel data estimation techniques controlling for country fixed effects and incidental(country specific)trend.The findings further reveal that debt waiver has dynamic impact on economic growth:the impact is positive and significant for four years only.The findings also reveal that granting debt waiver helps retard inflation in Highly Indebted Poor Countries.These findings are robust to different model specifications.Thus,debt waiver reduces government policy uncertainties towards servicing its debtors at the same time increasing its fiscal space.