Debt Relief: What Do the Markets Think?

51 Pages Posted: 6 Dec 2002 Last revised: 8 Aug 2022

See all articles by Serkan Arslanalp

Serkan Arslanalp

International Monetary Fund (IMF)

Peter Blair Henry

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER); NYU Stern Department of Finance

Date Written: December 2002

Abstract

The stock market appreciates by an average of 60 percent in real dollar terms when countries announce debt relief agreements under the Brady Plan. In contrast, there is no significant increase in market value for a control group of countries that do not sign agreements. The results persist after controlling for IMF agreements, trade liberalizations, capital account liberalizations, and privatization programs. The stock market revaluations forecast higher future net resource transfers and GDP growth. While markets respond favorably to debt relief in the Brady countries, there is no evidence to suggest that current debt relief efforts for the Highly-Indebted Poor Countries (HIPCs) will achieve similar results.

Suggested Citation

Arslanalp, Serkan and Henry, Peter Blair, Debt Relief: What Do the Markets Think? (December 2002). NBER Working Paper No. w9369, Available at SSRN: https://ssrn.com/abstract=359880

Serkan Arslanalp

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Peter Blair Henry (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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Suite 9-160
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National Bureau of Economic Research (NBER)

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NYU Stern Department of Finance ( email )

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HOME PAGE: http://https://www.stern.nyu.edu/faculty/bio/peter-henry

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