Debt and peace in post-conflict countries

Post-conflict economies are characterized by high, and often growing, levels of debt. At the same time, peace is particularly fragile in the aftermath of a conflict. This chapter studies how debt affects the risk of war in the 10 years that follow the end of a previous conflict. After controlling for per-capita income and other economic, political, and geographical factors, external debt is found to increase the risk of war. Conversely, the effect of domestic debt is negligible. The policy implication for the international community is clear: debt relief helps stabilize peace in war-torn economies.