“External Debt, Domestic Investment and Economic Growth in Cameroon” A system Estimation Approach

The feedback of external debt on economic growth through gross domestic investment has provided quite interesting results throughout the world especially in developing countries where external and internal borrowing have been a tradition. Based on a system estimation approach, using Two Stage Least Squares as an estimation technique in the case of Cameroon for a period of 34 years (1980-2013), the results reveal that while domestic investment increases economic growth, external debt retards economic growth in Cameroon, revealing the influence of debt overhang. It was therefore concluded that external debts adversely affect economic growth in Cameroon and thus, as a major recommendation, the authorities are expected to improve on the performance of external debt through proper debt management, a complete debt relief and using the debt in productive sectors for production of goods and services

Central Asia: Problems of External Debt and Its Sustainability

This paper is devoted to one of the most urgent problems of Central Asian economies in transition, i.e. external debt and its sustainability within systemic transformation process. On the basis of vast current statistical data the problems of structure and dynamics of external debt are analysed and some policy recommendations are made. Basic transfer equations and two-gap models are used as tools to measure external debt. The paper attempts to find solutions considering both specific causes of the external debt itself and debt problems via related balance of payments issues. In conlcusion, it emphasized the necessity to deal with external debt through policies in all spheres of debt management, foreign trade and the flow of international financial resources implemented simultaneously. It proves that only the cumulative effect of all measures will allow the rather complex and persistent character of external debt to be overcome.Central Asian Independent States, External Debt, Indebtedness Indicators, Debt Sustainability

External debt sustainability: empirical evidence in Brazil

The purpose of this paper is to investigate the sustainability of the external debt in Brazil, or, in other words, to analyze if Brazilian economy in consideration of its external debt repayments keeps solvent. Tests show that, for different periods and using different models and variables, external debt and current account deficits are not sustainable in the long run, confirming other studies that tested sustainability of the current account and external debt in Brazil.debt sustainability; Brazil; external debt

Does Military Spending Explode External Debt in Pakistan?

This paper explores the effect of military expenditures on external debt in case of Pakistan over the period of 1973-2009. For this purpose, ARDL bounds testing approach is used to examine cointegration between the variables. ADF, P-P and ADF-GLS, Clemente et al. (1998) unit root tests are applied to check the order of integration of variables. OLS and ECM regressions approaches are employed to investigate marginal impact of military spending on external debt in long and short run. Our findings indicate cointegration which confirms long run relationship between military expenditures, external debt, economic growth and investment. The results reveal that a rise in military expenditures increases the stock of external debt. The inverse effect of economic growth on external debt is found and an increase in investment is also increasing external debt in the country. This study invites policy makers to approach the problem of curtailing external debt in innovative ways in case of Pakistan.Military Spending, External Debt, Cointegration

External debt management in Romania

This paper approaches the evolution of Romania’s foreign debt in three periods of time: during Nicolae Ceausescu regime, in the transition period and the one which followed the adhesion to European Union. For all three periods the external debt management had to deal with different circumstances: the sharp increase of real interest rates from the 1980s, the lack of credibility on international financial markets from the 1990s or the recent global crisis. We conclude that political regime, the efficiency of the allocation of the borrowed funds or the international context played major roles in the external debt management.

Maturity, indebtedness, and default risk

In this paper, the authors advance the theory and computation of Eaton-Gersovitz style models of sovereign debt by incorporating long-term debt and proving the existence of an equilibrium price function with the property that the interest rate on debt is increasing in the amount borrowed and implementing a novel method of computing the equilibrium accurately. Using Argentina as a test case, they show that incorporating long-term debt allows the model to match the average external debt-to-output ratio, average spread on external debt, the standard deviation of spreads and simultaneously improve upon the model's ability to account for Argentina's other cyclical facts.Debts, Public ; Debts, External

THE MILITARY EXPENDITURE-EXTERNAL DEBT NEXUS: NEW EVIDENCE FROM A PANEL OF MIDDLE EASTERN COUNTRIES

This paper examines the impact of military expenditure and income on external debt for a panel of six Middle Eastern countries; namely, Oman, Syria, Yemen, Bahrain, Iran, and Jordan, over the period 1988 to 2002. Using Pedroni's (2004) test for panel cointegration, we find that there is a long-run relationship between external debt, military expenditure and income. The estimated long-run elasticities suggest that an increase in military expenditure contributes to a rise in external debt, while an increase in income helps the Middle Eastern countries to pay off their external debt.

Causality between external debt and capital flight in Sub-Saharan Africa

Over the past few decades, the foreign liabilities of the majority of countries in Sub-Saharan Africa have grown dramatically, propelling most nations into the status of Highly Indebted Poor Countries, when these liabilities reached unsustainable levels in the 1990s. At the same time, increases in capital flight from the region followed a parallel trend, leading scholars to draw on"revolving door"models to explain the apparent positive covariation of external debt and capital flight in the region. This paper investigates the causality between external debt and capital flight in a cross-section of Sub-Saharan African countries using co-integration and error-correction models. Although dual causality, which is consistent with the revolving door hypothesis, cannot be rejected for the majority of countries, empirical evidence highlights the lead of external debt over capital flight. The significance of error-correction terms points to a long-run co-integrating relationship between external debt and capital flight in a large number of countries.Economic Theory&Research,External Debt,Debt Markets,Deposit Insurance,Currencies and Exchange Rates

Commodity Windfalls, Democracy, and External Debt

We examine the effects that revenue windfalls from international commodity price booms have on external debt in a panel of 93 countries during the period 1970-2007. Our main finding is that increases in the international prices of exported commodity goods lead to a significant reduction in the level of external debt in democracies, but to no significant reduction in the level of external debt in autocracies. To explain this result, we show that in autocracies commodity windfalls lead to a statistically significant and quantitatively large increase in government expenditures. In democracies on the other hand government expenditures did not increase significantly. We also document that following commodity windfalls the risk of default on external debt decreased in democracies, but increased significantly in autocracies.commodity windfalls, debt, political institutions

Impact of Trade Liberalization on External Debt Burden: Econometric Evidence from Pakistan

Pakistan’s leading challenge today is to lessen its debt burden in order to pursue a path that leads towards sustainable and impartial growth for poverty diminution. The consequences of trade liberalization are of growing concern, mainly in the emerging economies with severe brim over effects on their debt situation. The major objective of this paper is to discuss the current external debt problem in Pakistan and analyze how its external debt is interrelated with trade liberalization policies and measures .Using data from the last three decades, this paper investigated whether there exist a momentous relationship between external debt and the trade liberalization variables or not. In this case study ARDL bounds testing approach is employed to investigate the long run relationships and Error Correction Method (ECM) for short run dynamics. After finding the order of integration through implementing the Augmented Dickey Fuller (ADF) and Phillips-Perron unit root tests, our finding suggested a significant long run positive association between external debt and trade liberalization is existed in case of PakistanExternal Debt, Trade Liberalization, ARDL Bounds Testing, Error Correction Method