Bayraktar, NihalFofack, Hippolyte2012-03-192012-03-192011-12-01https://hdl.handle.net/10986/3693Access to debt relief under the Highly Indebted Poor Country Initiative enhanced the growth performance across Sub-Saharan Africa, especially in the subset of debt-ridden low-income countries. Over the past few years, these Completion Point countries have enjoyed significantly higher investments and growth rates, primarily fueled by the expanding fiscal space of the post-Highly Indebted Poor Country Initiative era. They are also weathering the adverse effects of the global crisis much better than their non-Highly Indebted Poor Country Initiative counterparts. Despite these growth rebounds, the region is not likely to meet the Millennium Development Goals, however. Long-term growth projections from a simple macroeconomic model, which is applied to Ethiopia, suggest that prospects for reversing the widening income gaps with other regions of the developing world are limited. Under the baseline scenario, assuming current growth trends, the estimates show that it could take more than five decades for per capita real income to double in Ethiopia. However, even these gloomy prospects are likely to be undermined by the looming risk of another sovereign debt crisis. In effect, the experiments show that lowering interest rates on external debt would not bridge the widening income gap with other regions of the world, unless it is accompanied by a rapid expansion of capital accumulation financed by sustained inflows of foreign aid.CC BY 3.0 IGOADVANCED ECONOMIESADVANCED TECHNOLOGYADVERSE EFFECTSADVERSE SHOCKSAGGREGATE DEMANDAID EFFECTIVENESSARREARSBALANCE OF PAYMENTBALANCE OF PAYMENTSBALANCE OF PAYMENTS CRISESBALANCE OF PAYMENTS DEFICITSBANK POLICYBASE YEARBORROWING COUNTRIESBRIDGE FINANCINGBUDGET CONSTRAINTBUDGET DEFICITBUSINESS CYCLESCAPITAL ACCOUNTCAPITAL ACCUMULATIONCAPITAL FLOWSCAPITAL INFLOWSCAPITAL STOCKCOMMODITYCOMMODITY EXPORTSCOMPARATIVE ANALYSISCONSTANT SHARECONSTANT SHARESCOUNTRY INITIATIVECREDITORSCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT SURPLUSESDEBTDEBT BURDENDEBT CRISISDEBT OVERHANGDEBT RELIEFDEBT STOCKDEBT STOCKSDEBT STRUCTUREDEBTSDEFICIT FINANCINGDEFICITSDEPRECIATIONDEPRECIATION RATEDEPRECIATION RATESDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDISPOSABLE INCOMEDIVERSIFICATIONDIVIDENDSDOMESTIC BORROWINGDOMESTIC CAPITALDOMESTIC CAPITAL MARKETSDOMESTIC DEBTDOMESTIC FINANCIAL MARKETSDOMESTIC GOODDOMESTIC GOODSDOMESTIC MARKETDOMESTIC MARKETSDOMESTIC PRICEECONOMIC CONDITIONSECONOMIC COOPERATIONECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC OUTCOMESECONOMIC OUTLOOKECONOMIC PERFORMANCEECONOMIC PERFORMANCESECONOMIC REGIONECONOMIC RESEARCHECONOMIC TRENDSELASTICITYELASTICITY OF SUBSTITUTIONEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSENDOGENOUS VARIABLESEQUILIBRIUMEQUILIBRIUM CONDITIONEQUILIBRIUM PRICEEQUILIBRIUM VALUEEXCHANGE RATEEXCHANGE RATE MOVEMENTSEXCHANGE RATESEXISTING DEBTSEXOGENOUS VARIABLESEXPECTED PRESENT VALUEEXPENDITUREEXPENDITURESEXPORTSEXPOSUREEXTERNAL BORROWINGEXTERNAL DEBTEXTERNAL FINANCEEXTERNAL FINANCINGEXTERNAL INDEBTEDNESSEXTERNAL SHOCKSFACE VALUEFACTORS OF PRODUCTIONFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL CRISISFINANCIAL RESOURCESFISCAL DEFICITSFISCAL POLICYFOREIGN DEBTFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN FINANCINGFOREIGN INTERESTFUTURE RESEARCHGDPGDP PER CAPITAGENDERGLOBAL ECONOMYGLOBAL TRADEGLOBALIZATIONGOVERNMENT BUDGETGOVERNMENT DEFICITGOVERNMENT EXPENDITUREGOVERNMENT REVENUEGOVERNMENT REVENUESGOVERNMENT SPENDINGGROSS DOMESTIC PRODUCTGROWTH PERFORMANCEGROWTH PROJECTIONSGROWTH RATEGROWTH RATESGROWTH THEORYHOMOGENEOUS GOODHOUSEHOLDSHUMAN CAPITALIMPORTSINCOMEINCOME FLOWSINCOME GROWTHINFRASTRUCTURE PROJECTSINTEREST PAYMENTINTEREST PAYMENTSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINVESTMENT FUNCTIONINVESTMENT INCOMESINVESTMENT RATESINVESTMENT SPENDINGLABOR FORCELAFFER CURVELOCAL CURRENCYLONG-TERM COSTSLONG-TERM DEBTLOW INTEREST RATELOW-INCOME COUNTRIESMACROECONOMIC MODELMACROECONOMIC STABILITYMARKET EQUILIBRIUMMONETARY FUNDNATURAL RESOURCENATURAL RESOURCESNET EXPORTSNEW MARKETSNOMINAL EXCHANGE RATENOMINAL GROSS DOMESTIC PRODUCTOUTPUTOUTPUT GAPPER CAPITA INCOMEPOLICY RESPONSESPOPULATION GROWTHPOVERTY REDUCTIONPRICE OF EXPORTSPRICE OF GOODSPRIMARY COMMODITYPRIVATE CAPITALPRIVATE CAPITAL STOCKPRIVATE CAPITAL STOCKSPRIVATE CONSUMPTIONPRIVATE INVESTMENTPRIVATE SAVINGSPRODUCTION FUNCTIONPRODUCTION STRUCTUREPUBLIC BORROWINGPUBLIC DEBTPUBLIC EXTERNAL DEBTPUBLIC INVESTMENTPUBLIC INVESTMENTSPUBLIC SAVINGSPUBLIC SPENDINGRAPID EXPANSIONREAL EXCHANGE RATEREAL GDPREAL INCOMEREAL INVESTMENTRELATIVE PRICESRESERVESRETURNSSAVINGS RATESHARE OF WORLD TRADESHORTFALLSSLOW GROWTHSOVEREIGN DEBTSPEED OF ADJUSTMENTSTOCK OPTIONTAXTAX BURDENSTAX RATETAX REVENUESTRADE BALANCETRADE PATTERNTRADE PATTERNSTRADE SHOCKSTRADINGVIRTUOUS CYCLEVOLATILITYWELFARE BENEFITSWORLD ECONOMYWORLD PRICEWorld Bank10.1596/1813-9450-5924