Andrew Sherman - Writing Sample

Debt, Debt Service, and Governance: Enabling Conditions for Debt Forgiveness as an Aid Modality

Drew Sherman

MPA Candidate – Indiana University

School of Public and Environmental Affairs

F560 – Public Finance and Budgeting

Drew ShermanF560 – Public Finance and Budgeting

IntroductionDebt today is a pervasive tool used to finance activities in all aspects of society, including

development. Households use it to pay for their homes, college education, and cars. Commercial

and industrial entities use debt to facilitate growth and new business opportunities. National,

regional, and local governments may utilize debt to finance economic development,

infrastructure projects, and social programs until future revenue can pay off debt stocks. In many

cases this is an effective tool which drives economic growth, social prosperity, and raises the

standard of living; however, for entities and/or households that find themselves unable to finance

their debt, it can be a devastating burden which stagnates performance. In this paper, we will

review literature related to debt, debt forgiveness, other aid modalities, and the role of

governance in foreign aid. This meta-analysis will give a better idea as to the current state of

debt-related economic conditions and the future of international debt policy. We will use a

multivariate regression to determine which macroeconomic and governance-related factors

influence the amount of debt forgiven over the last 30 years. This analysis will test the

hypothesis that debt and governance conditions have a relationship with the amount of debt

forgiveness a recipient country can expect.

Literature ReviewWhy do countries incur public debt? Public debt financing is not a new concept, and

luckily the father of modern economics is able to help us answer that question. In his iconic

work, The Wealth of Nations, Adam Smith delivers a descriptive perspective on public financing

and public debt (1776). In peacetime, sovereign states tend to match outlays and receipts as

much as possible. Expenditures (outlays) include both the essential functions of government

(health, education, infrastructure, etc.) and other discretionary spending strongly desired by

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citizens (poverty reduction, economic development, and social programs). The majority of

revenues (receipts) are collected through taxation, though other mechanisms exist.

This theory is rather straightforward, but it requires the assumption of responsible

governance by that sovereign state1. Smith’s good governance assumption leads us to believe

that each marginal dollar spent will lead to the most effective additional benefit to the state

(Smith, 1776). Under these conditions the government should have policies which allow for the

effective distribution and allocation of government resources, and stabilization of the economy

when introduced to external or internal forces (Mikesell, 2014).

However, in times of exigent circumstances – such as war, economic recession, disaster,

or public health emergency – a government has the responsibility to incur additional expenses

immediately to address such events. In this short-term period, raising tax revenues to match

expenditure would be burdensome and slow. The government would need to determine the

expected deficit, calculate debt liability, propose and enact new tax rates, and then collect the

additional funds from taxpayers. Unfortunately, tax payers may also need substantial time to earn

additional income to pay for a tax increase. As a result, the government will choose to sell debt

assets to fund its immediate needs on the assurance to its creditors that it will pay them back with

interest in the future (Smith, 1776).

To make this debt financing possible, the creditors must be confident that the obligations

will be paid back in the long-run2. Stronger creditor confidence due to positive economic outlook

and perceived good governance means the creditor will be willing to lend more money, while

low confidence that comes from a stagnating economy or perceived poor governance might lead

1 Good governance is described here as rational decision-making, the propensity to seek a zero-profit, and/or alternatively the decisions to save or to incur debt which promote the best interests of the sovereign state both economically and socially.2 Today, credit ratings maintained by companies like Fitch, Moody’s, and S&P are used as an indicator of creditor confidence and issuer creditworthiness (Finney, 2016).

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the creditor to go to great lengths to protect their assets and reduce their exposure in the

marketplace. If the government feels it is unlikely to garner lender support in the future, it will

choose to save in advance of any potential exigent circumstances to cover resulting budget

deficits. This “rainy day” fund is an example of a budget stabilization tool that many U.S. states

and other governments include in their annual budgets (Mikesell, 2014).

Alternatively, many modern countries are able to close or reduce budget deficits with

strategies other than acquiring debt or hoarding revenues into savings accounts. Today over 130

countries receive Official Development Assistance3 (ODA) flows and other forms of foreign aid.

During the Cold War much of this ODA was used to financially support countries within larger

alliances to advance political and military objectives (Mavrotas, 2007). Now, ODA flows are

primarily directed to development and supporting economic and social conditions in recipient

countries.

During the 1990s foreign direct investment (FDI) began to surge, serving as another

important condition for country-level economic and social development. FDI is particularly

successful at bringing a developing country into the global marketplace, improving its trade

orientation and increasing competitive innovation. Botchwey linked this increase to a belief that

the global free market could be trusted to finance development in poorer countries and the spread

of globalization. However, he found that FDI flows were heavily concentrated among just a few

middle-income countries, mostly neglecting the Least Developed Countries. A handful of

middle-income countries accounted for over 90% of capital market flows and FDI flows during

the 1990s (Botchwey, 2000). Additionally, there is also some evidence that countries receiving

3 Some countries are both recipients and donors of ODA (Organisation for Economic Co-operation and Development, 2015).

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large sums of foreign aid will receive less FDI4 (Beladi & Beladi, 2007). Unfortunately, low-

income countries also lack many of the prerequisite conditions which are associated with rapid

growth in FDI in the 1990s5 (Botchwey, 2000). These prerequisites include access to

international markets, geography and natural resources, as well as conditions of good governance

which make foreign aid more effective (Mavrotas, 2007; Bigsten, 2007; Sachs, 2005).

In the following sections, we will explore additional literature about the effectiveness of

foreign aid by discussing aid structure, implementation, and enabling conditions which allow for

these financing tools to encourage economic growth and social prosperity. We will also review

the 1982 Debt Crisis and the 1997 East Asian Financial Crisis and look at the subsequent aid

policies adopted by the global community in addressing the developing world’s debt overhang

and rising debt burden.

Does foreign aid work? First, we must understand what it means for aid to work. White

examines the aid-poverty link in order to better understand the relationship that aid has with

economic growth. How should aid be allocated to maximize poverty-reducing impact? This is a

difficult question to answer, but does provide direction for our research. Aid is considered robust

and effective at inducing growth if it improves human capital6, and can be delivered directly or

indirectly. Direct foreign aid activities can be in the form of building a new hospital, or by

paying for primary school tuition. These activities are what we typically imagine when we think

of foreign aid. Indirect activities are meant to improve the economic environment in which

poverty-stricken countries operate. Foreign investment that leads to an export-oriented economy,

4 Foreign aid can reduce sector-specific foreign investment by limiting competitiveness in that sector. Some evidence also suggests that price effects resulting from foreign aid hinder economic growth and local industry.5 Rapid FDI growth requires a favorable policy environment, high growth rates, low transaction costs, and market size.6 Human capital consists of physical and mental health and well-being, as well as educational capacity and other intangible characteristics. Some studies consider resilience in evaluating human capital, but here we’re only considering measurable conditions related to human capital, namely health and education.

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thus re-balancing the terms of trade7 for individuals, is a way to boost economic activity to make

acquiring health and educational resources more affordable. Indirect efforts at reducing poverty

may partially improve human capital, but the multidimensional nature of poverty requires more

concerted efforts at improving standards of living and life outcomes.

Aid tends to work better in countries with sound policies and good governance8.

Specifically, the recipient country must be sure that its fiscal, monetary, and trade policies are all

adequate and effective in creating an environment conducive to translating foreign aid resources

to real economic results9 (Mavrotas, 2007; White, 2007). In some instances, governments can

still impact growth independent of their policy conditions (White, 2007). Unfortunately, aid

flows in the international community are largely inconsistent and unreliable10. There is some

evidence that this inconsistency limits economic growth in countries which heavily rely on aid

flows. Improving aid forecasting is a vital area which could build resiliency among developing

nations (Mavrotas, 2007).

Recent evidence also supports Smith’s (1776) claim that the expectation of external

financial flows may reduce savings. The rationale behind this lack of savings is consistent with

the original theories: budgetary shortfalls are less drastic when deficits are reduced by foreign

aid, but donors expect money to be put to use immediately, not hoarded, and current policy

conditions cause developing countries to have a high expectation of being bailed out during

exigent circumstances like a public health emergency or natural disaster. This presents one of the

major challenges in foreign aid: the balance between capacity building and aid dependence.

7 Terms of trade refers to the relative purchasing power for a country or an individual. Increasing purchasing power allows for the acquisition of more productive resources due to lower costs, higher income, or both.8 Mavrotas cites Burnside and Dollar, 1997.9 Perceived good governance can improve a recipient counties creditworthiness, which increases probability of future lending.10 International institutions are not required by law to provide foreign aid, and economic circumstances may cause the donor country to be more conservative during recessions, which adversely affects recipient countries.

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Policy coherence becomes convoluted as countries balance their own tax revenues with debt

relief, grants, FDI, private donations, and in-kind aid in the form of food assistance. If the

balance shifts toward reliance on external resources, then countries will experience a disincentive

to take back ownership of domestic revenue provision (Mavrotas, 2007).

Bigsten (2007) encourages international financial institutions and foreign donors to re-

think the way they structure aid packages to developing countries. Traditionally, struggling

institutions in the recipient country are forced to comply with very restrictive and austere

policies11 to receive aid; however, this has led to poor implementation as a result of misaligned

goals and expectations (Thomas, 1999; Bigsten, 2007). Instead, Bigsten recommends that

governments must be committed to their own policies, and foreign donors must channel

resources into development programs that the recipient country actually believes in. However,

mutual agreement is necessary, as donors will withhold funding if they do not support a program.

A great deal of foreign aid is earmarked for specific uses. Since the 1990s at the end of

the Cold War, the primary aim for aid has been poverty reduction. Due to the fungibility of aid,

poverty reduction programs can include infrastructure, public health, fighting disease, and food

and nutritional assistance (White, 2007). Not all activities which aim to reduce poverty result in

increased incomes. Some interventions focus on standard of living, reducing costs, and providing

essential goods and services which the recipient is otherwise unable to purchase given their

capacity constraints. This finding informs us that not all aid has specific and measurable

economic outcomes (White, 2007), but we also know that not all fungible aid resources are

directed toward social programs which focus on improving human capital (Botchwey, 2000).

This separation of economic and social outcomes makes evaluating the effectiveness of aid

11 IMF and World Bank encourage budget cuts to balance the budget, but this reduces funds to be used on activities which improve human capital and reduce poverty.

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difficult, but we can see that building capacity12 for development is an important prerequisite of

growth and a characteristic of fungible aid resources.

Given certain enabling conditions like sound policy, good governance, and trade

orientation, foreign aid can contribute to a rise in human capital through economic growth and

social programs which build capacity. Without these conditions, aid effectiveness decreases, and

in some cases, may even result in losses in terms of trade. The expectations for debt relief are

consistent with these assumptions.

We can look back to the mid-20th century for effective alternatives to debt financing.

Europe, devastated by the activities during World War II, suffered economically and was largely

unable to rebuild its industry and boost productivity on its own. In 1948, Congress passed the

Economic Cooperation Act, also known as the Marshall Plan13. The intent of the Marshall Plan

was to aid in rebuilding Western Europe by generating a resurgence of industrialization and

foreign investment. The United States received huge dividends as recovering economies began

do demand more American goods (Office of the Historian, 2016). An important feature of the

Marshall Plan was the unconditional nature of the aid and investment. Delivering this aid in the

form of grants, rather than loans, enabled Europe to grow quickly and to sustain that growth by

avoiding major debt obligations and by choosing development strategies which provided the

most effective additional benefit for each marginal dollar spent (Sachs, 2005).

Today, organizations like the International Monetary Fund (IMF) and the World Bank

provide enormous funding capabilities to developing nations in the form of conditional loans and

grants, meaning the recipient country is required to meet certain conditions and measures as a

12 Capacity here is described by the presence of available resources which can be directed to a particular purpose. In some cases, unconditional aid may increase capacity, but the government will choose to use that capacity to lower its taxpayer burden or to increase bureaucrat compensation. 13 Marshall Plan is the namesake of the former Secretary of State, George C. Marshall. The ECA approved funding that would rise to over $12 billion directed to Western Europe.

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pre-condition of receiving aid, and must continue to meet expectations to stay current on their

obligations. In many instances, which we will discuss later, conditional agreements can be

effective, but come with important drawbacks.

To further understand why this paper targets debt forgiveness, we will briefly review

recent debt crises which have devastated global economies and continue to hinder economic

performance. The first event is the 1982 debt crisis, which was a result of increasing

deregulation14 and commodity price shocks15 (Palac-McMiken, 1995). The resulting debt

overhang owned by many of the Least Developed Countries (LDCs) had devastating effects once

the crisis materialized. At that time, U.S. policy tended to protect large commercial banks with

high debt exposure, encouraging countries to continue debt service, but a tipping point was

finally reached when Mexico and other HIPCs decided to suspend debt service indefinitely.

Banks were no longer able to recoup the full value of their debt exposure and began to sell debt

assets at discounted prices (Palac-McMiken, 1995; Sachs & Huizinga, 1987).

Similarly, in 1997 the East Asian Financial Crisis many more countries struggled with

unsustainable debts. This crisis was characterized mostly by foreign direct investments which

were stymied by financial mismanagement and the burden of public debt. Liability and exposure

were more heavily concentrated among a few private institutions. Some investors lost confidence

that governments would meet debt service targets, and sold debt assets to other creditors at

discount prices on the secondary market. Governments in need of new lending were unable to

access new funds (Botchwey, 2000). Today, the global economy is still recovering from the 14 Globally, financial institutions began to offer more foreign debt in a relatively unregulated market. Lack of oversight and understanding of financial implications mixed with periods of massive investment led to acquisition of large long-term debt stocks. Among non-oil producing countries the share of publicly-guaranteed debt rose from 25 to 41% in the decade before the crisis. 15 Oil prices increased dramatically in 1973-74 and 1979-80, incentivizing OPEC countries to double-down on investments in oil extraction. Banks recycled new money as additional lending capacity. When price shocks occurred, oil-importing countries could not afford higher prices, and borrowed to cover deficit. Terms of trade negatively impacted net-importers by reducing purchasing power.

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effects of the Great Recession. Many rich and developing countries were forced to take on debt

to cover massive deficits. Debt and debt forgiveness will continue to be important in

international development for years, so understanding the conditions which lead to debt

forgiveness is increasingly important.

DataWe have accessed our data from the World Bank’s world development indicators, which

are updated quarterly. There are 217 countries and small nations included in our data. The world

development indicators cover years from 1960 to 2016, but for the scope of this paper, we have

limited ourselves to the years from 1989 to 2015. These years have the most complete data and

immediately follow the years of interest discussed during the literature review. During the

selected year we can analyze the debt forgiveness conditions which follow the 1980s debt crisis,

1990s financial crisis, and the onset of the HIPC Initiative in the 2000s (The World Bank, 2016).

MethodologyWe will run a multivariate regression with the total amount of debt forgiven for each

country in the 27-year period as the dependent variable. The independent variables are the

average value of exports as a percentage of Gross Domestic Product, the average debt stocks as a

percentage of Gross National Income, and the average debt service as a percentage of national

expenditure. Other independent variables include the country’s inclusion in the HIPC or OECD.

Countries which belong to neither are represented in the intercept of the regression equation.

Before we run the regression we anticipate the model regression equation to be the following:

Debt Forgiveness=β1+β2 (exp )+β3 ( Stock )+ β4 ( Serv )+β5 ( HIPC )+ β6

Figure 1. Definition RationaleDF($)

Total amount of debt forgiven in the designated decade

This is our dependent variable because we want to understand what conditions make it more likely for a country to have its debt forgiven.

Exp Average Value of Exports as a percentage This gives us an idea of a country’s trade

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(%) of Gross Domestic Product in the designated decade

orientation and participation in the global economy. Countries which are relatively export heavy are expected to withstand greater debts before rescheduling.

Serv(%)

Average amount of debt service as a percentage of total expenditure in the designated decade

Debt service is an indication of the pressure a country’s debt burden is putting on discretionary spending, potentially squeezing out spending on education, healthcare, infrastructure, and development.

Stock(%)

Average debt stock as a percentage of Gross National Income in the designated decade

Debt stock is used to measure the debt overhang for a country, while considering the actual economic potential to overcome future debt obligations. Creditors may not lend to countries with large debt stocks.

HIPC Heavily Indebted Poor Countries (dummy) We have identified that 36 countries have become eligible for debt relief as a result of an inability to pay existing debts. This will inform us of the effect of the HIPC Initiative.

OECD Organization for Economic Co-operation and Development (dummy)

We also want to test to see if a relatively wealthy and well-governed subset of countries has an effect on the amount of debt forgiven.

Debt forgiveness is selected as the dependent variable in this model because it frees up

economic resources for uses other than debt service. The fungible nature of aid means that a

reduced share of expenditures used for debt service may result in a higher proportion of funds

allocated to activities which promote economic growth16. Debt forgiveness was a necessity

following the 1980s financial crisis, but gained traction in the late 1990s as an effective policy by

the World Bank and International Monetary Fund to aid developing countries.

We consider exports as a percentage of Gross Domestic Product to consider trade

orientation. Our literature generally considers net-exporters to be more capable of withstanding

commodity price shocks, disasters, and other exigent circumstances17. An exporting trade

orientation allows a country to avoid the need to finance deficits by selling debt. This might lead

16 Spending on infrastructure, health, education, and other poverty-reducing activities which promote development is optimal.17 Price shocks can cause large deficits as higher prices must be paid for imports, reducing the terms of trade. Also, disasters or external pressures might result in significant unplanned expenses, causing deficits which must be financed through aid or debt; however, net-exporters have a stronger revenue base and are more resilient.

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us to believe that net-exporting countries might actually reduce the amount of debt that is

forgiven.

Debt stock is discussed quite a bit in our literature. Several authors cite secondary market

discount prices that result from doubt in a country’s ability to cover its debt obligations. We use

debt stock as a percentage of Gross National Income to measure this ability. As obligations

exceed revenue generation (GNI) creditors become skeptical that they will recoup their debt

exposure from less creditworthy countries, and begin to sell off debt assets at discount prices.

ResultsThe initial regression found only two of the five independent variables to be significant at

the .05 level, however the model as a whole is still significant at that level. Parameter estimates

for the initial regression and the tests for significance are shown in Table 1. When including all

independent variables, we could still reject the null hypothesis for the model, which states that

there is no relationship on the variation in debt forgiveness with respect to the other variables. To

refine our model, we begin to eliminate non-significant independent variables. In sequential

order, we removed the independent variables with non-significant effects on debt forgiveness at

the .05 level. First, we removed the exports as a percentage of GDP, then debt stock as a

percentage of GNI, and lastly we excluded the dummy variable OECD. Our final multivariate

regression included only debt service as a percentage of total expenditure and the dummy

variable which represents status as a country that meets the eligibility standards as a Heavily

Indebted Poor Country.

Debt Forgiveness=−$ 188,196,549−$ 98,746,299 (Serv )−$2,386,165,250 ( HIPC )

This refined multivariate regression has an F-statistic of 22.10, which is significant at

the .05 level. We can still reject the null hypothesis that there is no relationship between the

variation in debt forgiveness with respect to debt service and status as an HIPC. In the refined

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regression model, for each one percent (.01) increase in debt service as a percentage of

expenditure, the recipient country’s debt stock is reduced by $98,746,299 over the 27-year

period18. If the country has reached the post-completion point for the HIPC Initiative the

country’s debt stock is reduced by $2,386,165,250 over the 27-year period. Our adjusted R2

is .1719, which indicates that 17.19% of the variation in debt forgiveness can be explained by the

relationship in the model. This is a relatively small relationship, but has some practical

usefulness in understanding why a country may receive debt forgiveness. Parameter estimates

and tests for significance are shown in Table 2.

DiscussionWe can conclude that there is a significant relationship in our model, which has limited

predictive capability in determining the amount of debt forgiveness a recipient country can

expect. As illustrated in the literature review, there are many conditions which influence a

country’s economic performance. Some argued that an export-oriented economy is favorable for

countries trying to manage their debt (Berg & Sachs, 1988), but that isn’t clear in our model.

Several also note the weight that debt stock can have on fulfilling obligations (Palac-McMiken,

1995; Sachs & Huizinga, 1987), but we do not see a significant relationship in our model from

these independent variables.

Debt service as a percentage of national expenditure remains the most relevant measure

of the strain a country faces in financing for its future. The fact that a higher debt service ratio

results in debt being forgiven indicates that the payments were unsustainable and forced the

government to sacrifice spending in more important areas. This finding is also paired with the

significant relationship that exists among HIPC countries, indicating that the international

creditors prefer to work with debtor nations that can demonstrate good governance and a desire 18 The negative value reflects a reduction in debt stock, which can also be described as an increase in the amount of debt forgiven.

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to reform their economic policies according to standards set by the International Monetary Fund

and the World Bank.

We have reason to believe that countries which reach the post-completion point for the

HIPC Initiative and see their debt stocks reduced will eventually experience subsequent

reductions in poverty and an aggregate rise in standard of living, assuming policies and reforms

are long-lasting and effective. With heavier scrutiny from the international community we can

hope that countries will appropriate these aid inflows in ways that will raise human capital and

close the gap between local and global economic markets. This observation is reinforced through

seeing the rise in Foreign Direct Investment as countries begin to prosper and investor

confidence increases (Botchwey, 2000). Additionally, as debt stock decreases and debt service

becomes more manageable, we will see more countries borrow responsible to invest for their

future, rather than to cover deficits caused by poor terms of trade or lack of a revenue capital

base.

Throughout the literature on aid effectiveness and the willingness of the international

community to provide support to developing nations, the role of governance and sound economic

policy are two of the most important considerations in making a country eligible for foreign aid

(International Monetary Fund, 2016; Berg & Sachs, 1988; Cassimon & Van Campenhout, 2007;

Lahiri, 2007; Mavrotas, 2007; Thomas, 1999; White, 2007). The most important factor is still the

presence and pervasiveness of poverty, but these can be better addressed when enabling

conditions exist. By withholding aid until a policy and governance preconditions are met the

international community is able to make the aid they deliver more effective.

The fungibility of most aid also presents challenges. There is no guarantee that money

freed up through debt forgiveness will result in poverty-reducing activities, but it does make that

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spending more probable. When the recipient country takes ownership of their own development

agenda we are more likely to see the next marginal dollar spent on areas like health, education,

or infrastructure. Some areas which could be improved upon would be in the selection and use of

variables to interpret our data, as well as the incompleteness of our data. Only about 90 of the

217 countries had complete information for the 27-year period selected. Most debt data are

provided by the creditors, but a more complete data bank would have been more informative.

Also, there are two adjustments which should be made if trying to replicate this analysis.

First, debt forgiveness should be measured as a percentage of total debt stock at the time relief

was granted. This gives us a better idea as to the magnitude of forgiveness relative to the

economy of each country. Second, we should have created a dummy variable for whether the

country was a net exporter or importer to determine true trade orientation. Instead, we were only

able to measure the extent to which a national economy engaged with the global economy, which

is important, but not robust.

If we had complete data, it would have been interesting to exclude all but the 36 HIPC

countries and to run a regression to see if any patterns or relationships emerge within the sub-

group. Knowing that each country has reached the post-completion point for the HIPC Initiative

we could refine our analysis to better understand the conditions among these countries that

influence the amount of debt forgiven.

ConclusionIn this paper we discussed the reasons why nations accumulate debt, and the

macroeconomic conditions which may cause the debt to be unsustainable or damaging to the

debtor country. We identified several conditions through our literature review, and used some of

these to analyze our data from the World Development Indicators in a multivariate regression,

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controlling for status as a Heavily Indebted Poor Country, according to the World Bank and

International Monetary Fund.

We found debt service as a percentage of expenditure and status as an HIPC nation to be

significant. This relationship was relatively weak, most likely due to other economic factors not

fully discussed in the scope of this paper, such as the Great Recession19 and the onset of the

Millennium Development Goals and Sustainable Development Goals20. Debt financing will

continue as a tool for economic development, infrastructure projects, and social programs.

Additionally, as economies continue to become more interconnected, national governments must

adhere to the standards of international economic policy and good governance. However, in poor

economic times or in cases of exigent circumstances, we must have the capability to identify

when a country’s debt burden is unsustainable and to correct it before its citizens experience

losses in economic or human capital.

19 Economies all over the world stagnated and suffered major losses in capital during this time, those that financed these losses by selling debt will need to pay off those liabilities in the coming years.20 International policy in the last 20 years has taken development more seriously. New revenue sources and aid inflows might have made debt forgiveness less necessary for some countries because of the increased capacity they experienced and will experience during this time. MDGs and SDGs are targeting human capital goals, but debt forgiveness is just one tool that contributes to these targets.

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Exhibits

Table 1 - Initial Model Parameter Estimate t-statistic Pr<F

Exp (%) $1,708,903 .20 .8442

Stock (%) -$2,136,325 -.42 .6728

*Serv (%) -$99,140,452 -3.33 .0010

*HIPC -$2,324,628,906 -3.22 .0015

OECD -$762,711,570 -1.18 .2379

* The independent variable is significant at the .01 level.

Table 2 - Refined Model Parameter Estimate t-statistic Pr<F

*Serv (%) -$98,746,299 -3.97 <.0001

*HIPC -$2,386,165,250 -3.76 .0002

* The independent variable is significant at the .01 level.

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Andrew Sherman - Writing Sample