The Effect of Debt Forgiveness on Transparency Caitlin Garrabrant Katerina Mamay Prof. Vreeland October 14, 2014

Research Question and Hypothesis Transparency Research question: Does debt forgiveness or reduction incentivize countries to increase their economic transparency? Our hypothesis is that some programs cause countries to increase transparency before and during the debt relief program. Debt forgiveness

Background Information Eric Neumayer’s research Nicholas Chauvin and Aart Kraay How is our research different? 1- Eric Neumayer’s research: countries with good governance do not receive more aid. (transparency does not have an impact on debt forgiveness) 2- Nicholas Chauvin and Aart Kraay: Debt relief is more dependent on policies and less dependent on per capita income and total national debt than other forms of aid. (transparency does have an impact on debt forgiveness) 3- We use transparency as our dependent variable. We are not investigating the effect of transparency on debt forgiveness, but how participation in debt relief programs affects transparency.

Case Studies Benin: - HIPC 1998-2003 - Increasing transparency before and during - Drop in transparency Sierra Leone - HIPC 2002-2007 - Stable transparency

Method 125 countries (1890-2010) Observations: 2103 Debt forgiveness mean:  -330.15 (millions of current $ US)  WDI Transparency mean:  1.178 (HRV index) *Mean given that there was debt forgiveness HRV index: based on how much information was provide to data bases such as the World Bank

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