Economic Issues - IMF eLibrary · 2020. 4. 1. · onerous debt-servicing obligations. As the stock...

The IMF launched the Economic Issues series in 1996 to make theIMF staff’s research findings accessible to the public. EconomicIssues are short, nontechnical monographs on topical issues writtenfor the nonspecialist reader. They are published in six languages—English, Arabic, Chinese, French, Russian, and Spanish. EconomicIssue No. 34, like the others in the series, reflects the opinions of itsauthors, which are not necessarily those of the IMF.

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E C O N O M I C I S S U E S 34

I N T E R N A T I O N A L M O N E T A R Y F U N D

Benedict ClementsRina BhattacharyaToan Quoc Nguyen

Can Debt Relief BoostGrowth in Poor

Countries?


©2005 International Monetary Fund

Series EditorAsimina CaminisIMF External Relations Department

Cover design Massoud Etemadi

ISBN 1-58906-354-6ISSN 1020-5098

Published April 2005

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International Monetary Fund, Publication Services700 19th Street, N.W., Washington, D.C. 20431 U.S.A.Tel: (202) 623-7430 Fax: (202) 623-7201E-mail: [email protected]: http://www.imf.org/pubs


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Preface

Twenty-eight heavily indebted poor countries (HIPCs) were receiv-ing debt relief under the HIPC Initiative by mid-2004, eight yearsafter the Initiative was launched by the IMF and the World Bank andendorsed by governments around the world, and about four yearsafter it was enhanced to provide more substantial and faster debt relief.

The HIPC Initiative, the first coordinated effort by the interna-tional financial community to reduce the foreign debt of the world’spoorest countries, was based on the theory that economic growth inthese countries was being stifled by heavy debt burdens, making itvirtually impossible for them to escape poverty. However, most ofthe empirical research to date on the effects of debt on growth haslumped together a diverse group of countries, including both emerg-ing market and low-income countries; the literature focusing on theimpact of debt on low-income countries (those with 2001 per capitagross national income of less than US$865) is scant.

The paper on which this pamphlet is based, “External Debt,Public Investment, and Growth in Low-Income Countries” (IMFWorking Paper No. 03/249, December 2003), addresses this gap inthe literature. The paper also appeared as a chapter in a book pub-lished by the IMF in 2004, Helping Countries Develop: The Role ofFiscal Policy, edited by Sanjeev Gupta, Benedict Clements, andGabriela Inchauste. It assesses empirically the effects of externaldebt on growth in low-income countries and analyzes the channelsthrough which these effects are transmitted, giving special attentionto the indirect effects of external debt on growth through its impacton public investment. Readers seeking a more detailed descriptionof our analysis and of the literature on debt and growth aredirected to the original working paper, which is available free ofcharge at www.imf.org/pubs. Brenda Szittya prepared the text for thispamphlet.


www.imf.org/pubs

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Can Debt Relief Boost Growth in Poor Countries?

The 1996 launch of the Heavily Indebted Poor Countries (HIPC)Initiative by the IMF and the World Bank revived a long-standing

debate over the relationship between foreign borrowing and eco-nomic growth. The goal of the HIPC Initiative—which providescomprehensive debt relief to poor nations struggling to serviceheavy foreign debt burdens—is to prevent unsustainable debt bur-dens from hampering development in the world’s poorest nations.Indeed, one of the principal motivations for the HIPC Initiative isconcern that a heavy debt burden compromises economic growth.

Analysts have extensively studied the effect of foreign debt ongrowth, but few of these studies have focused on low-income coun-tries. However, differences between emerging market countries andlow-income countries make it likely that foreign debt affects the twogroups of countries differently. Unlike emerging market countries,for example, very poor countries have limited access to internationalcapital markets. And their dissimilar economic structures and publicsectors may mean that debt affects growth differently in the twogroups. Finally, the aid that donors provide to low-income countriescould mitigate any negative effects debt service obligations mighthave on their economic activity. An analysis of the debt/growth rela-tionship in low-income countries could therefore be especially use-ful in assessing the effectiveness of the HIPC Initiative in enhancinggrowth.

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Summary of the literature

The theoretical literature on the relationship between external debtand economic growth has focused largely on the harmful effects ofa country’s “debt overhang”—the accumulation of a stock of debt solarge as to threaten the country’s ability to repay its past loans,which, in turn, scares off potential lenders and investors. That is, ifa country’s debt level is expected to exceed the country’s repaymentability with some probability in the future, expected debt service islikely to be an increasing function of the country’s output level.Thus, some of the returns from investing in the domestic economyare effectively “taxed away” by existing foreign creditors, and invest-ment by domestic and foreign investors is discouraged.

Debt overhang also depresses growth by increasing investors’uncertainty about actions the government might take to meet itsonerous debt-servicing obligations. As the stock of public sectordebt rises, investors may worry that the government will finance itsdebt-service obligations through distortionary measures, such asrapidly increasing the money supply (which causes inflation). Amidsuch uncertainty, wary would-be private investors tend to remain onthe sidelines. And even when they do invest, they are more likelyto opt for projects with quick returns rather than for projects thatenhance growth on a sustainable basis over the long run.

Moreover, debt overhang may also discourage efforts by the gov-ernment to carry out structural and fiscal reforms that couldstrengthen the country’s economic growth and fiscal position,because a government whose financial position is improving almostinevitably finds itself under increasing pressure to repay foreigncreditors. This disincentive to reform would exist in any countrywith a heavy external debt burden, but it is of special concern inlow-income countries, where structural reforms are essential to sus-tain higher growth.

Of course, not all foreign borrowing dampens investment andgrowth. At low levels of debt, additional foreign borrowing couldstimulate growth, to the extent that the additional capital financedby this new borrowing enhances the country’s productive capacity.Higher output, in turn, would make it easier for a country to serviceits debt. As debt and the capital stock increase, however, the marginal

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Economic Issue No. 34


productivity of investment falls. Some analysts have argued that onlyabove a certain threshold will additional foreign loans have a nega-tive impact on growth, owing to the debt-overhang considerationsexplained above. That is, up to a certain threshold, increased bor-rowing makes repayment of debt more likely. But, beyond thatthreshold, further increases in foreign debt reduce the prospects ofcreditors being repaid. As a country’s access to loans drops, its abil-ity to accumulate capital suffers, and growth may slow. In short, thenegative effects of debt overhang are likely to take effect only aftera certain threshold level has been reached.

The empirical literature has found mixed support for the debt-overhang hypothesis. Most models of the determinants of growthhave presumed that the stock of debt affects growth both directly(by reducing a government’s incentives to undertake structuralreforms) and indirectly (by dampening investment). But relativelyfew studies have assessed the direct effects of the debt stock oninvestment in low-income countries econometrically. A 2001 reviewof studies on the debt-overhang hypothesis by Geske Dijkstra andNiels Hermes found the empirical evidence on this issue to beinconclusive (“The Uncertainty of Debt Service Payments andEconomic Growth of Highly Indebted Poor Countries: Is There aCase for Debt Relief?” (unpublished; Helsinki: United NationsUniversity)). And few studies have been able to determine howlarge the stock of external debt has to be, relative to GDP, for thedebt overhang to have an effect.

A 2002 study of 93 developing countries between 1969 and 1998,“External Debt and Growth,” by Catherine Pattillo, Helene Poirson,and Luca Ricci (IMF Working Paper No. 02/69), found strong sup-port for the debt-overhang hypothesis, however. The authors foundthat external debt began to have a negative impact on growth whenits net present value exceeded 160–170 percent of exports and35–40 percent of GDP. Their simulations suggest that doubling theaverage stock of external debt in these countries would slow downannual per capita growth by between a half and a full percentagepoint.

In a follow-up study in 2004, “What Are the Channels ThroughWhich External Debt Affects Growth?” (IMF WP/04/15), Pattillo and


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her coauthors applied a growth-accounting framework to a group of61 developing countries over 1969–98 and found that doubling theiraverage external debt level reduces growth of both per capita phys-ical capital and total factor productivity by almost 1 percentagepoint. In other words, large debt stocks negatively affect growth bydampening both physical capital accumulation and total factor pro-ductivity growth.

In theory, the service of external public debt (the payment ofinterest and repayment of principal)—to be distinguished from thestock of external debt—may also affect growth by discouraging pri-vate investment or altering the composition of public spending.Higher external interest payments can increase a country’s budgetdeficit, thereby reducing public savings. This, in turn, may eitherdrive up interest rates or crowd out the credit available for privateinvestment, depressing economic growth. Larger debt-service pay-ments can also inhibit growth by squeezing the public resourcesavailable for investment in infrastructure and human capital. Indeed,such nongovernmental organizations as Oxfam International seehigh external debt service as a key obstacle to meeting basic humanneeds in developing countries. But relatively few empirical studieshave tested these hypotheses by assessing the effects of debt servicepayments on private investment or on the composition of publicspending, and the available empirical evidence is mixed.

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Empirical analysis

Using data for 1970–99 for 55 low-income countries (see box onpage 11) classified as eligible for the IMF’s Poverty Reduction andGrowth Facility, which provides concessional loans at low interestrates (0.5 percent a year), we estimated equations to identify the keydeterminants of the growth of real per capita income (GDP).

To account for the role of debt, we augmented the standardgrowth model with four widely used debt variables—the face valueand the net present value of the stock of external public debt, eachas a share of GDP and as a share of exports of goods and services.

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In principle, the net present value of debt reflects the degree of con-cessionality of loans—long repayment periods and below-marketinterest rates—and is therefore a more accurate measure of theexpected burden of future debt-service payments than the facevalue of debt.

In the model, the chief determinants of growth of real per capitaincome (GDP) are

• lagged real income per capita (a proxy for the level of eco-nomic development),

• population growth,• gross investment (public as well as private) in percent of GDP,• secondary school enrollment,• changes in the terms of trade (to capture external shocks),• the central government’s fiscal balance in percent of GDP,• openness to trade,• total debt service (private and public) as a share of export earn-

ings, and• the four indicators of the stock of external debt.

Growth modelEstimated results provide some support for the debt-overhanghypothesis and suggest a threshold of about 30–37 percent of GDP.Beyond that threshold, higher external debt is associated with lowergrowth rates for per capita income, independent of any effect debtmay have on gross domestic investment.

Debt service, in contrast with the stock of debt, has no directeffect on growth, perhaps because its influence is realized throughits impact on investment, which is also included as an explanatoryvariable in the model and is thus held constant. Gross investmenthas a significant positive impact on growth. Lagged GDP has a sta-tistically significant negative impact. The central government’s fiscalbalance has a significant positive effect, consistent with recentresearch that found links between sound fiscal policy and economicgrowth, while population growth and terms of trade shocks are sta-tistically significant and negative. Openness and secondary schoolenrollment have no discernible effect. The insignificance of the lattercould be due to the modest range of educational attainment levels


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in our sample of low-income countries. Thus, despite the fact that arelationship between education and growth may exist for develop-ing countries as a group, it was not possible to quantify such a rela-tionship for the low-income countries chosen for this study.

Reestimating the growth equations, but disaggregating grossinvestment into private and public investment, suggests that it ispublic investment that affects growth in low-income countries. Foreach percentage point of GDP increase in public investment, annualper capita growth rises 0.2 percentage point. High levels of publicinvestment that increase budget deficits do not necessarily lead tofaster growth, however, because larger budget deficits have a damp-ening effect on economic activity. In the reestimated equations,changes in the terms of trade, population growth, and opennesshave no significant effect on growth. As before, debt service has nodirect effect. With respect to the stock of debt, the results are onceagain consistent with the debt-overhang hypothesis—the marginalimpact of external debt on growth becomes negative beyond athreshold ratio of debt-to-GDP of about 50 percent of GDP for theface value of debt and 20–25 percent of GDP for the estimated netpresent value of debt.

These findings have important implications for the impact of HIPCdebt relief. The weighted average net present value of external debt toGDP for the 27 HIPCs that had reached the “decision point” as of July2003—reaching this point means they have been initially approved forpartial HIPC debt relief—is projected to decline from 60 percent beforedebt relief at the decision point to 30 percent by 2005. By that time,most of the HIPCs are expected to have reached their “completionpoints”—that is, they will have implemented key policy reforms,maintained macroeconomic stability, and implemented a povertyreduction strategy for at least one year, making them eligible for fullHIPC debt relief. (Fourteen countries had reached their completionpoints by the end of July 2004.) Based on our estimates, this debtreduction would, other things being equal, directly add 0.8–1.1 per-centage point to these countries’ annual per capita GDP growth rates.

These findings imply a more powerful relationship between debtand growth in poor countries than researchers have found in devel-oping countries generally. And the effect of debt on growth is

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greater when the effects of debt on public investment and the cen-tral government’s fiscal balance, both of which influence growth, aretaken into account.

Public investment modelAnalysts have as yet done relatively little research on the determi-nants of public investment in low-income developing countries. In2001, Jan-Egbert Sturm at the University of Kostanz in Germanymodeled public investment in developing countries using three setsof determinants: (1) structural variables such as urbanization andpopulation growth; (2) economic variables such as real GDP growth,government debt, budget deficits, and foreign aid; and (3) politico-institutional variables to measure, for example, political stability.Sturm found the politico-institutional variables less significant thanthe structural and economic variables. (We did not include them inour empirical analysis of public investment, not only because insti-tutional variables have not been found to be significant in explain-ing public investment in developing countries but also, and moreimportant, because of lack of data.) We model public investment asbeing a function of (1) urbanization, (2) total debt service as a shareof GDP, (3) foreign aid, (4) openness, (5) lagged real per capitaincome, and (6) the same four indicators of the stock of externaldebt used in the growth model.

The theoretical impact of urbanization on public investment isambiguous. On the one hand, it could be argued that, as a societybecomes urbanized, the provision of services like education andhealth care shift from the family to the government; thus, one mightexpect urbanization to increase public investment. On the otherhand, most public capital spending concerns physical infrastructure,for which rural areas have a relatively greater need. Thus, urbaniza-tion could weaken demand for physical infrastructure while, per-haps, strengthening demand for public consumption spending; as aresult, public investment would decrease.

We measured total debt service as a percentage of GDP ratherthan as a share of exports because this appears, at least intuitively,to be the measure that would most affect government decisionsabout public investment. However, the relationship between debt


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service and public investment is not necessarily a linear one. It isplausible that low debt-service payments have no perceptibleimpact on public investment, but that, as debt service absorbs agrowing share of national income, it begins to crowd out publicinvestment. It could be that crowding-out occurs only after debt ser-vice exceeds a certain threshold.

Increased foreign aid would be expected to enable governmentsto spend more on public investment. Openness would be expectedto increase public investment because more open economies oftencompete for foreign direct investment, for example, for financinginfrastructure projects. As before, we used the lagged per capitaincome variable as a proxy for the level of economic development.

Estimates of the public investment equation yield some interest-ing results. The openness of a country’s economy and the receipt offoreign aid seem to boost public investment substantially, whileurbanization dampens it considerably. Higher real per capita incomealso boosts public investment significantly in low-income countries.

The stock of external debt has no significant effect on publicinvestment; public investment seems to be driven more by the gov-ernment’s current fiscal position and the availability of resourcesthan by factors that affect fiscal sustainability over the longer term.However, the results support the hypothesis that higher debt service(as opposed to the stock of external debt) crowds out public invest-ment. The relationship is nonlinear, with the crowding-out effectintensifying as the ratio of debt service to GDP rises. On average,for every percentage point of GDP increase in debt service, publicinvestment declines by about 0.2 percentage point of GDP. In somesense, the modest magnitude of this decline is surprising, indicatingthat large debt burdens have not seriously hampered public invest-ment in low-income countries. More important, it implies that, allthings being equal, debt relief by itself cannot be expected to leadto large increases in public investment. In most cases, debt reliefleads either to greater public consumption or, if used to reducegovernment deficits or to lower taxes, to greater private consump-tion and investment.

If only a small share of debt relief is channeled into public invest-ment, the corresponding impact on growth will also be modest. For

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example, a reduction in the ratio of debt service to GDP from 8.7 percent (the average in 2000 of the seven most heavily indebtedpoor countries) to 3.0 percent (roughly the average debt service-to-GDP ratio for all highly indebted poor countries in 2002) wouldincrease public investment by 0.7–0.8 percentage point of GDP andindirectly raise real per capita GDP growth by 0.1–0.2 percentagepoint annually. Still, this small boost to growth (in absolute terms)is roughly equal to the actual growth in per capita incomes achievedby heavily indebted poor countries during the 1990s. Moreover, ifhalf (instead of a fifth) of this debt service relief were channeled topublic investment, annual per capita growth would rise quite signif-icantly (about 0.5 percentage point a year). Under all scenarios, thepositive impact of greater public investment on growth will be off-set, in part or in full, if financed through larger budget deficits.

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Conclusions

Although high levels of debt can depress economic growth in low-income countries, external debt slows growth only after its facevalue reaches a threshold level estimated to be about 50 percent ofGDP (or, in net present value terms, 20–25 percent of GDP). Thesefindings imply that the substantial reduction in external debt pro-jected for the countries participating in the HIPC Initiative woulddirectly add 0.8–1.1 percent to their per capita GDP growth rates.Indeed, the positive effects of debt relief may already be reflectedin some of the healthier growth rates achieved by these countries inthe past few years relative to their poor performance in the 1990s.(Annual GDP growth averaged 1.2 percent in 2000–02, comparedwith 0.2 percent during the 1990s.)

External debt also affects growth indirectly through its effect onpublic investment. Although the stock of public debt does notappear to depress public investment, the cost of servicing the debtdoes. The relationship is nonlinear, with the crowding-out effectintensifying as the ratio of debt service to GDP rises. On average,


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every percentage point increase in debt service as a share of GDPreduces public investment by about 0.2 percentage point, implyingthat reducing debt service by about 6 percentage points of GDPwould raise public investment by 0.75–1.0 percentage point of GDP,which, in turn, would result in a modest increase of about 0.2 per-centage point in growth. But if a greater share of this debt relief—say, about half—could be channeled into public investment, growthcould increase by 0.5 percentage point a year.

While each low-income country participating in the HIPCInitiative determines its use of debt relief in the context of its ownpoverty reduction strategy, the findings here suggest that one wayfor country authorities to raise growth and combat poverty wouldbe to allocate a substantial share of debt relief to public investment.As noted earlier, the full benefits of higher public investment will bereaped only if greater public spending on capital outlays is not asso-ciated with increasing budget deficits.

These findings have important implications for the design ofadjustment programs in countries receiving debt relief. Reducing thestock of debt alone—rather than immediately reducing debt service—is unlikely to induce governments to increase their spending onpublic investment. And, although cutting debt-service obligationscan provide countries with the breathing space they need toincrease public investment, debt relief by itself is likely to raise pub-lic investment only modestly. In practice, most countries participat-ing in the HIPC Initiative have been raising public investment whilereceiving financial support for their reform programs from the IMF’sPoverty Reduction and Growth Facility (PRGF). (On average, theyhave targeted an increase of 0.5 percentage point of GDP in publicinvestment expenditure relative to the year before they started theirPRGF-supported reform program.)

Given the significance of debt’s indirect effect on growth throughpublic investment, it may be useful for researchers to focus on otherindirect channels through which debt affects growth. In particular,the finding that stronger central government fiscal balances con-tribute to growth suggests that the relationship between debt andpublic sector deficits merits further examination.

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AlbaniaAngolaArmeniaBangladeshBeninBhutanBoliviaBurkina FasoBurundiCambodiaCameroonCape VerdeCentral African RepublicChadComorosDemocratic Republic of CongoRepublic of CongoCôte d’IvoireDjiboutiEritreaEthiopiaThe GambiaGhanaGuineaHaitiHondurasIndiaKenyaKyrgyz Republic

Lao People’s DemocraticRepublic

Macedonia, former YugoslavRepublic of

MadagascarMalawiMaliMauritaniaMozambiqueNepalNicaraguaNigerNigeriaPakistanRwandaSamoaSenegalSierra LeoneSolomon IslandsSri LankaTanzaniaTogoUgandaVanuatuVietnamYemenZambiaZimbabwe

Countries in Study


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The Economic Issues Series

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12. Does the Exchange Rate Regime Matter for Inflation and Growth? AtishR. Ghosh, Anne-Marie Gulde, Jonathan D. Ostry, and Holger Wolf.1996.

13. Confronting Budget Deficits. 1996.

14. Fiscal Reforms That Work. C. John McDermott and Robert F. Wescott.1996.

15. Transformations to Open Market Operations: Developing Economies andEmerging Markets. Stephen H. Axilrod. 1996.

16. Why Worry About Corruption? Paolo Mauro. 1997.

17. Sterilizing Capital Inflows. Jang-Yung Lee. 1997.

18. Why Is China Growing So Fast? Zuliu Hu and Mohsin S. Khan. 1997.

19. Protecting Bank Deposits. Gillian G. Garcia. 1997.

10. Deindustrialization—Its Causes and Implications. Robert Rowthornand Ramana Ramaswamy. 1997.

11. Does Globalization Lower Wages and Export Jobs? Matthew J. Slaughterand Phillip Swagel. 1997.

12. Roads to Nowhere: How Corruption in Public Investment HurtsGrowth. Vito Tanzi and Hamid Davoodi. 1998.

13. Fixed or Flexible? Getting the Exchange Rate Right in the 1990s.Francesco Caramazza and Jahangir Aziz. 1998.

14. Lessons from Systemic Bank Restructuring. Claudia Dziobek and CeylaPazarbasıoglu. 1998.

15. Inflation Targeting as a Framework for Monetary Policy. Guy Debelle,Paul Masson, Miguel Savastano, and Sunil Sharma. 1998.

16. Should Equity Be a Goal of Economic Policy? IMF Fiscal AffairsDepartment. 1998.

17. Liberalizing Capital Movements: Some Analytical Issues. BarryEichengreen, Michael Mussa, Giovanni Dell’Ariccia, EnricaDetragiache, Gian Maria Milesi-Ferretti, and Andrew Tweedie. 1999.

18. Privatization in Transition Countries: Lessons of the First Decade. OlehHavrylyshyn and Donal McGettigan. 1999.

19. Hedge Funds: What Do We Really Know? Barry Eichengreen andDonald Mathieson. 1999.

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20. Job Creation: Why Some Countries Do Better. Pietro Garibaldi andPaolo Mauro. 2000.

21. Improving Governance and Fighting Corruption in the Baltic and CISCountries: The Role of the IMF. Thomas Wolf and Emine Gürgen. 2000.

22. The Challenge of Predicting Economic Crises. Andrew Berg andCatherine Pattillo. 2000.

23. Promoting Growth in Sub-Saharan Africa: Learning What Works.Anupam Basu, Evangelos A. Calamitsis, and Dhaneshwar Ghura. 2000.

24. Full Dollarization: The Pros and Cons. Andrew Berg and EduardoBorensztein. 2000.

25. Controlling Pollution Using Taxes and Tradable Permits. JohnNorregaard and Valérie Reppelin-Hill. 2000.

26. Rural Poverty in Developing Countries: Implications for Public Policy.Mahmood Hasan Khan. 2001.

27. Tax Policy for Developing Countries. Vito Tanzi and Howell Zee. 2001.

28. Moral Hazard: Does IMF Financing Encourage Imprudence byBorrowers and Lenders? Timothy Lane and Steven Phillips. 2002.

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30. Hiding in the Shadows: The Growth of the Underground Economy.Friedrich Schneider with Dominik Enste. 2002.

31. Corporate Sector Restructuring: The Role of Government in Times ofCrisis. Mark R. Stone. 2002.

32. Should Financial Sector Regulators Be Independent? Marc Quintyn andMichael W. Taylor. 2004.

33. Educating Children in Poor Countries. Arye L. Hillman and EvaJenkner. 2004.

34. Can Debt Relief Boost Growth in Poor Countries? Benedict Clements,Rina Bhattacharya, and Toan Quoc Nguyen. 2005.

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Benedict Clements is an Advisor in the WesternHemisphere Department at the IMF. He has pub-lished widely on a range of macroeconomic and fis-cal issues. He is coeditor (with Sanjeev Gupta andGabriela Inchauste) of Helping Countries Develop:The Role of Fiscal Policy. Before joining the IMF, hewas an Associate Professor of Economics at Provi-dence College. He has a Ph.D. in Economics from the University ofNotre Dame.

Rina Bhattacharya is an economist in the IMF’sAfrican Department. She has written papers on awide range of issues and published in journals suchas Journal of Development Economics and AppliedEconomics. She has also worked at the University ofSussex in England, the U.K. Treasury, and the Bankof England. She holds a B.A. in Economics fromCambridge University, an M.Sc. in Development Economics fromOxford University, and a Ph.D. in Economics from Yale University.

Toan Quoc Nguyen is an economist at the Asian Development Bank.He holds a B.A. in Economics and Finance from Edith Cowan Univer-sity in Australia, an M.A. in Economics of Development from theNational University of Vietnam, and a Ph.D. in Economics from NewYork University. He was an intern in the IMF’s Fiscal Affairs Depart-ment in the summer of 2002 when work was initiated on this paper.


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