Effects of the Oil Shocks, Interest Rate, and Current Account Balance on the Sovereign Debt of CEMAC Member Countries

Michel Okiemy,Koumou Guénolé Mbongo

doi:10.4236/me.2021.121010

Abstract

The objective of this paper is to analyze the effects of oil shocks, interest rates and balance of payment on the sovereign debt of member countries of the Central African Economic and Monetary Community (CEMAC) from 1998 to 2018 using the nonlinear autoregressive distributed lag (NARDL) method. The obtained results demonstrate short- and long-term asymmetric relationships among oil shocks, interest rate, and balances of payment on the sovereign debts of these countries. A positive long-term shock increases sovereign debt, while debt services deteriorate during negative short-term shocks, which demonstrates the procyclical behavior of the debt of these countries. These results enable us to formulate implications for economic policies to improve budget management and diversify the economy.

Highlights

The global capital market has experienced sovereign defaults1, and from 1824 to 1999, emerging countries have experienced on average three defaults or re-structuring crises every 100 years (Reinhart et al, 2003)
The analysis of the effects of oil shocks, interest rates, and current account balance on sovereign debt is based on the nonlinear ARDL method, which is an extension of a dynamic model of the linear version of the ARDL model by Shin et al (2014)
The objective of this paper was to analyze the effects of asymmetric oil price shocks to the interest rates and current account balances on the sovereign debts of Cameroon, Congo and Gabon over a period from 1998 to 2018

Summary

Introduction

The global capital market has experienced sovereign defaults, and from 1824 to 1999, emerging countries have experienced on average three defaults or re-structuring crises every 100 years (Reinhart et al, 2003).

Objectives

Methods

Results

Conclusion