Debt Service Research Articles

Nonlinear effects of public debt on economic growth in Nigeria.

The COVID-19 pandemic induced governments all over the world to momentarily accumulatehigher levels of public debt in order to invest in deficit spending and social protection programs to tackle the anticipated economic slump. The Nigerian government has borrowed heavily from domestic and foreign sources in order to resolve thegrowing budget deficits and return the economy to a sustainable growth trajectory. Previous studies frequently made the incorrect assumption that the relationship between public debt and growth is linear and symmetric, leading to empirical resultsthat is frequently disputed and imprecise. This study's main objective is to examine the asymmetric impact of public debt on economic growth in Nigeria from 1980 to 2020 using the Nonlinear Autoregressive Distributed Lag method. Empirical evidence indicated that external debt have a significant positive and symmetric impact on economic growth in the long and short run, while debt service payment supporting the debt overhang hypothesis activated a symmetric effect that stifle growth. Domestic debt retarded growth asymmetrically in the short term and linearly over the long term. Foreign reserve holding, on the other hand, had an asymmetric long-run influence and a symmetric short-run impact on growth motivation. To mitigate the negative effects of unsustainable public debt, the study advocated for fiscal reforms that effectively reduce deficit financing to keep the level of government debt low and be able to respond robustly to an economic shock, improve domestic revenue generation and infrastructure spending, and strengthen governance practices and institutions.

Research on the Investment Value of Hybrid Funds in the Chinese Capital Market based on Factor Analysis

Factor analysis is a cutting-edge and effective data processing method that has a wide range of uses in the field of finance, as it can reduce the numerous indicators in finance into a few valid common factors in the form of factor analysis. The researcher can name the factors by the percentage contribution of each variable in the different factors. After that, the scores of financial products (e.g., stocks, funds) on different factors give a clear picture of how well the product performs in these aspects. The main research direction of this paper is to reduce the dimensionality of each index of hybrid funds in the Chinese fund market through the factor analysis technique to get reasonable public factors. And to rank these funds with factor scores to get the best funds among these ninety hybrid funds to make recommendations for investors. Finally, this paper successfully selects four excellent hybrid funds, which have excellent performance in terms of size, earnings, and debt-servicing ability, which can provide some reasonable suggestions for investors who want to invest in Chinese hybrid funds.

Non-linearities in the relationship between public debt and inequality

ABSTRACT This paper examines the possible nonlinear relationship between public debt and income inequality. The literature extensively examines the non-linear growth effects of public debt, whereas its inequality effects are not investigated sufficiently. Public debt can be used to finance distributive policies, thereby improving income equality. However, high public debt levels can also harm economic growth and decrease the fiscal space due to sustainability concerns, high risk premia, and large debt service burden. Hence, it is possible that public debt can have non-linear effects on inequality. The empirical analysis documents that the relationship between public debt and inequality is positive with a declining marginal effect in the case of advanced countries. However, developing countries display a U-shape relationship, implying that public debt is initially associated with declines in inequality, while higher levels of debt are associated with higher levels of inequality. The analysis also shows that the determinants of inequality can differ greatly between advanced and developing countries.

Rising Debt Burden and Its Impact on the Implementation of Three (3) Sustainable Development Goals in the Commonwealth African Member Countries (2016-2022)

This paper examined rising debt burden and its implication for implementing three (3) selected Sustainable Development Goals (SDGs) in the Commonwealth African member states. The methodology was mainly “Desk Research’’ with data collected from the World Bank Data Online Portal, covering the period 2016-2020. The approach analysis was to compare the estimated debt servicing obligations against estimated costs on investments on the selected SDGs and discuss its implications for successfully meeting these goals by 2030, under the assumption of rising public debt burden and low growth. The findings were as follows: - (i). Public debt stocks in all of these Commonwealth African states were already high, even, before COVID-19 which struck late in 2019, experiencing a very high-debt-to GDP ratios; that was far above 50 percent- Mozambique (116 %), Mauritius (105%), Zambia (85%) and Zimbabwe (61%) were spotted to have very high debt- to-GDP ratio amongst these member states. (ii). economic growth and domestic revenue collection in all of these Commonwealth African member states deteriorated in the year following the outbreak of the COVID-19. This widened the deficit and hence, the cycle of increased borrowing and rising debt burden continued unabated in these member states. (iii). none of these (20) Commonwealth African member states had invested enough in the SDGs to have come closer to meeting the internationally acceptable minimum annual expenditure threshold of 15-20% of GDP needed to achieve any of these three (3) selected SDGs. Governments therefore are encouraged to improve key aspects of macroeconomic fundamentals in order to improve domestic productivity, innovations in private sector involvement and stimulate overall confidence in the domestic economy in order to achieve the SDG agenda 2030.

Sri Lanka

Sri Lanka fell into an unprecedented crisis as a result of a series of shocks and policy missteps. Debt rose to unsustainable levels resulting from large fiscal imbalances, and access to international capital markets was lost soon after large tax cuts and the onset of the COVID-19. Reserves were depleted, leading to a sharp exchange rate depreciation, and debt service was suspended in the spring of 2022. Sizable monetary financing to meet fiscal obligations contributed to a surge in inflation. Sri Lanka’s economy is in deep recession and financial stability is at risk given the tight financialsovereign nexus. People are suffering from food and energy shortages, exacerbating deep-rooted public dissatisfaction and creating a vulnerable political and social environment.

MIND THE GAAP: DETERMINANTS OF U.S. AIRLINE OPERATING CASH FLOWS

ABSTRACT The airline industry in the United States relies heavily on strong liquidity and solvency positions to fund an array of short and long-term variable and fixed costs ranging from cabin crew salaries to aircraft lease payments and debt service. Against the backdrop of these ongoing needs for cash is the ever-present risk of extraneous and expeditious demand shocks such as pandemics, terrorist incidents, and surging fuel costs. It is thus an imperative that airlines monitor their operating cash flows closely, especially when considering that many financial performance metrics are accrual-based and do not always paint a completely accurate picture of a firm’s true cash position. This study hypothesized and investigated significant determinants of operating cash flows for publicly-traded US airlines and found a statistically significant relationship between airlines operating cash flows and their total assets, income from operations, and market capitalization; which account for a large proportion of the variance in operating cash flows. This study is imperative to helping airlines understand the major determinants of operating cash flows as they look to recover from the pandemic and increase cash flow as well as maintain robust liquidity and solvency positions to fund an array of variable and fixed costs. Keywords Airlines, Operating Cash Flows, Accruals, Pandemic, Liquidity, Solvency

Government Debt Sustainability and Investments in Nigeria: Trends and Risk Thresholds amidst Macroeconomic Swings

The core idea behind government debt is to fund fiscal deficit, which is anticipated to drive economic investments. To a larger extent, this is not the case, as evidenced in the Nigerian context, where debt has risen so high with investment levels declining, thus questioning the government's ability to manage and sustain its debt to pursue vital investment needs. This study aimed to investigate the threshold effect of debt sustainability on investments amidst macroeconomic swings from 1981 to 2020. In this regard, the threshold autoregressive regression (TAR) was used because it gave information on the optimal threshold of debt sustainability that would attract investments. Also, the Granger causality test was carried out to show the direction of causality among the variables. This paper concentrated on debt service to revenue and total debt stock to GDP as debt sustainability measures while investment was decomposed into public, private, and foreign investments. The paper yields that, based on the multivariate TAR analyses, the main threshold variables, that is, debt service to revenue and total debt stock to GDP, had a non-linear relationship with public, private, and foreign direct investments amidst changes in macroeconomic variables such as exchange rate, inflation, and monetary policy rate. The threshold coefficient of debt service to revenue indicated that public and foreign direct investments declined during low thresholds while private investment increased. However, the opposite prevailed when debt service to revenue exceeded the threshold values. However, the Granger causality test showed that debt service to revenue Granger caused total debt stock to GDP and exchange rate Granger caused debt service to revenue ratio, implying that exchange rate swings could affect the government's ability to service debt which in turn explains the non-linear relationship between debt sustainability and investments. Hence, it was concluded that Nigeria's lack of debt sustainability was associated with revenue generation, which explains why the models did not follow a linear path.

Measuring and Analyzing Selected Determinants of Public Debt in Iraq (2004-2019)

This study examines the measuring and analyzing selected determinants of public debt in Iraq from 2004 to 2019. It first reviews the major events that led to deterioration of the state’s capacity in preventing risky borrow- ings before the fall of the Ba’ath regime. It then turns to the period under study, and applies the Fully Modified OLS )FMOLS( cointegration framework based on data from the central bank of Iraq. The main results show that public debt has been caused by a mixture of factors including a small share of non-oil revenue, increasing operational expenditure at the expense of investment expenditure by the government, and the ISIS attack. It also touches on the link between sectarianism and public debt, and explores the burden of debt services on ac- cumulating public debt. It concludes that there is always a risk of increasing budget deficit; thus, a proper plan for managing public debt is vital to prevent a debt default.

Budgetary policy of Ukraine in time of challenges and its impact on financial security

Ukraine has recently experienced a significant economic downturn as a result of the COVID-19 pandemic and the war caused by a large-scale military aggression of the Russian Federation. In conditions of the constant fluctuations of the national economy, the stimulating effect of the budgetary policy aimed at minimizing the consequences of such fluctuations and guaranteeing a sufficient level of financial security of the state becomes especially important. The aim of the study is to deepen the theoretical and methodological foundations of the creation and implementation of budgetary policy in Ukraine, evaluation of its impact on the financial security in time of challenges. The study uses methods of comparative analysis, grouping in the process of evaluating the current state of budgetary policy indicators, methods of normalization and standardization of data, modelling, and graphical analysis of data for normalizing the financial security indicators and determining the dynamics of financial security components. The materials and reports containing statistical data from the Ministry of Finance of Ukraine and the State Statistics Service of Ukraine served as the basis of the study. We found out that the components of the financial security of the state in the face of the challenges posed by martial law and the pandemic do not take into account the impact of budgetary policy. We substantiated the thesis that the creation of Ukraine's budgetary policy under martial law requires adjustments to the financial security assessment system. The most statistically significant and reliable models of interrelation were selected for further use in multifactor modelling and forecasting the financial security of the state (on the basis of ranking the linear, polynominal, exponential, logarithmic and power dependencies within one-factor equations). It was experimentally proved that out of 122 statistically significant indicators, budgetary policy indicators such as the coefficient of financing the national functions, the coefficient of public debt service and redemption, and the coefficient of the proportionality of financing the national security agencies had the greatest impact on the financial security of Ukraine. We also substantiated the scientific provisions behind the modelling of the level of financial security of Ukraine taking into account the impact of budgetary policy in the period of challenges. In the process of modelling, the indicators of budgetary policy were identified, while regression analysis revealed the factors influencing the budgetary policy.

From Debt to Green Growth: A Policy Proposal

Concurrent and overlapping crises, such as the COVID-19 pandemic and increases in energy and food costs, are particularly affecting developing and poor countries, in addition to the continuous and growing negative impacts from climate change. In this paper, we develop a policy proposal and show through a model how an implicit debt servicing standstill for a country with large external debt can be combined with a policy for promoting power generation from renewable energy sources, with positive effects for economic growth and for ensuring debt sustainability. Through a typical decentralized competitive general equilibrium endogenous growth model, we show the long term effects of partially redirecting debt payments to green energy infrastructure to facilitate economic growth and achieve a sustained debt-to-output level. The results indicate that a higher percentage of external public debt increases public capital accumulation, resulting in a higher long-run growth rate, albeit with a slower transition to a steady state. Equivalent results are found regarding the level of financial aid provided for public productive capital.

IMF lending in sovereign default

Abstract This paper proposes that an International Monetary Fund (IMF) policy shift was the reason behind major changes in sovereign debt negotiation outcomes observed in 1989. The new policy, in marked departure from past policy, allowed the IMF to lend to nations in default. The paper highlights the stark improvements in debt forgiveness and post-negotiation debt servicing ability coincident with the IMF policy shift. A theoretical framework is proposed in which the IMF policy shift causes the observed changes in negotiation outcomes. The model highlights the policy’s potential to improve a country’s outside option during negotiations of defaulted debt. In the model, this improvement leads to increased debt forgiveness which in turn leads to less post-negotiation debt servicing difficulties. The model is then used to address an important question regarding the nature of post-negotiation default risk. The case is made that countries face persistent, rather than temporary, default risk after such negotiations. To avert such risk, they moderate their borrowing.

Financial Distress Solutions through Improved Financial Performance and GCG with CSR as moderating variable for consumer services companies

<em><span lang="EN-GB">The Covid-19 pandemic has reduced Indonesia's state revenue in the tourism industry. This is caused by government policies that impact companies making it difficult to run their business. As a result, financial performance and corporate governance can be disrupted. This study intends to analyze and determine the power of companies' financial performance and good corporate governance (GCG) in preventing and overcoming conditions of financial distress in a consumer services company. Based on purposive sampling, the data for this research are 21 consumer services companies listed on the Indonesia Stock Exchange 2019-2021. This study also examines interactions Corporate Social Responsibility (CSR), which is a moderating variable. This research is descriptive with a quantitative explanatory approach, namely a study whose purpose is to explain the relationship between the variables studied and describe them. This research method uses panel regression data analysis. Financial distress in research is measured by Debt Service Coverage (DSCR). Researchers found that liquidity has a positive effect on DSCR, and ownership concentration has a negative effect on DSCR. While profitability, the board size, and gender diversity do not affect DSCR. CSR can strengthen the effect of profitability on DSCR, CSR can weaken the effect of liquidity on DSCR, and CSR can strengthen the effect of ownership concentration on DSCR. This study suggests that the company's consumer services should focus on financial performance and corporate governance, especially on liquidity and concentration of ownership, to overcome problems of financial distress.</span></em>

Does Public Debt and Investments Create Crowding-out Effect in Turkey? Evidence from ARDL Approach

The impact of public sector debt composition on the private sector is a matter of curiosity. This article explores the crowding-out effect of public debt and public investment on private investment in Turkey from 1975 to 2020, utilising the ARDL method. The findings reveal that public investment, public domestic debt stock, and external debt service create a crowding-out effect; on the other hand, the public external debt stock has a crowding-in effect on private sector investments. In this study, the crowding-out effect of public debt, which has not been directly related to private sector investments in the literature, is tried to be examined.

Elections, economic development and debt servicing in Africa

Despite the growing public debate on fiscal surprise during election periods in jurisdictions where the democratic dispensation is young, comprehensive empirical works to this effect in the case of Africa are hard to find. This study, therefore, sought to contribute to the debate on two counts. First, the study examines the effect of elections on debt servicing in Africa. Second, the study investigates the joint effect of economic development and elections on debt servicing in Africa. Using data drawn from the World Bank’s World Development Indicators over the period 1985–2015 for 43 African countries, the study provides evidence from the dynamic system GMM and the ordinry least squares estimators to show that— (1) election periods are associated with lower debt servicing in Africa, and (2) economic development is significant in enhancing debt servicing commitments even in election periods. Policy recommendations are provided in line with the growing levels of debt accumulation and unemployment in Africa.

EXTERNAL DEBT AND AGRICULTURAL PRODUCTION IN NIGERIA

The motivation for this paper stems from the rising debt profile of Nigeria, especially the foreign component, and its implication on growth prospects. In that regards, the study sought to establish the linkages between external debt and growth in productivity, specifically focusing on the agricultural sector. The study thus analyzed the relationship between external debt and Nigeria's agricultural production from 2006 to 2021 using secondary data obtained from the Central Bank of Nigeria (CBN) statistical bulletin and the World Development Indicators (WDI). ADF unit root test and the (ARDL) bound testing approach to cointegration were utilized, to achieve the objectives of the study. The parameters displayed a long-term association in both the short and long - run, according to empirical results, which demonstrated that the variables were cointegrated. External debt stock (EDS) and agricultural production, as assessed by agriculture gross domestic product (AGDP), had a substantial positive association, indicating that EDS positively impacted agricultural growth and that higher EDS accelerated agricultural growth over time. To be precise, a rise in EDS of 1% produced an increase in AGDP of 0.14%. Euro bond stock and bilateral loans also revealed positive relationships while External Debt Service Payment and Multilateral loans revealed negative relationships with AGDP. According to this research, the government must consider the strategy of diversifying its economy via agricultural output seriously. To lessen the cost and unfavorable effects of an excessive reliance on foreign exchange from oil and its price volatility, it is necessary to diversify the sources of external debt servicing, particularly in the non-oil sector including agriculture, mining, industry, and industrial production.
 Keywords: Debt, Agriculture, Loans, Output, Nigeria.

Cost burden among the CF population in the United States: A focus on debt, food insecurity, housing and health services

BackgroundAdvancements in the cystic fibrosis (CF) field have resulted in longer lifespans for individuals with CF. This has led to more responsibility for complex care regimens, frequent health care, and prescription medication utilization that are costly and may not be fully covered by health insurance. There are outstanding questions about unmet medical needs among the U.S. population with CF and how the financial burden of CF is associated with debt, housing instability, and food insecurity. MethodsResearchers developed the CF Health Insurance Survey (CF HIS) to survey a convenience sample of people living with CF in the U.S. The sample was weighted to reflect the parameters of the 2019 Cystic Fibrosis Foundation Patient Registry Annual Data Report, and chi-square tests and multiple logistic regression models were conducted. ResultsA total of 1,856 CF patients in the U.S. were included in the study. Of these, 64% faced a financial burden: 55% of respondents faced debt issues, 26% housing issues, and 33% food insecurity issues. A third reported at least one unmet medical need: 24% faced unmet prescription needs, 12% delayed or shortened a hospitalization, and 10% delayed or skipped a care center visit as a result of the cost of care. ConclusionsPeople with CF in the U.S. experience high financial burden, which is associated with unmet medical needs. Income is the biggest risk factor for financial burden for people with CF, with people dually covered by Medicare and Medicaid particularly at risk.

Taxation and citizen choice: The effect of a county charter on property taxes

AbstractAs saliency of the tax burden increases, the preference for a lower burden increases, but most counties are restricted by the state from adopting new taxes or changing the existing rates. Some states allow counties to adopt a charter, freeing them from state control. Using a panel of Florida counties from 1980 to 2017, we explore whether citizens act to reduce their property tax once a charter is passed. Citizens act against their preferences not by lowering burden but rather by increasing it in the case of debt service, suggesting citizens are maximizing their optimal tax burden in exchange for services.

Changes in the quality of bank loan portfolios in EU countries – with the particular case of Poland

As non-performing loans (NPLs) can cause monetary crises that may turn into financial crises affecting an entire economy, monitoring them is very important. If NPLs are not identified and recognized efficiently, both in terms of speed and scope, NPL resolution effectiveness is undermined, which in turn will have negative effects on the banking sector and ultimately on GDP growth.The main aim of this article is to identify changes in the quality of bank loan portfolios in European Union (EU) countries in 2009–2021, using an example of the Visegrad Group (Czech Republic, Poland, Slovakia, Hungary) as well as France and Germany. Keeping in mind the fact that the share of loans to households in EU portfolios is approximately 60%, it has a significant impact on the share of non-performing loans (NPL) in a bank’s entire portfolio. Therefore, it is important to identify macroeconomic determinants influencing the creditworthiness of households and their loan servicing capacity.The specific aims are, first, to present the differences in NPLs, debt servicing costs, and the structure of loan portfolios in the selected EU countries. Second, to identify countries with high-quality portfolios and those undertaking restructuring. Thirdly, to examine the determinants of NPL for household loans based on the example of Poland, i.e., a country considered representative in terms of the average level of NPL and the portfolio structure in the group of countries studied.This chapter presents the changes of NPLs, debt service ratio, and household loans in selected EU countries in 2009–2021. Moreover, an NPLs econometric model for Poland is constructed, which considers the main factors determining the creditworthiness of households, i.e., macroeconomic factors, financial standing, and debt servicing costs. Tools such as the VECM model, the variance decomposition and the impulse response functions are used. The results for Poland confirm that the NPLs ratio for households was the strongest explanation of previous changes in own NPL, consumption and real wages in the household sector in 2009–2021.

DEPLOYMENT OF RANDOM FOREST ALGORITHM TO PROPHESIZE THE EXACT PRICE OF GOLD

Historically, gold, unlike other payment channels, was employed to support trading acquisitions worldwide. We forecast future gold prices based on twenty-two market variables using a machine learning technique. In order to analyze these data, one machine learning approach, random forest regression, was applied. Numerous states have kept and increased their gold reserves while being progressive and rich. In reality, central banks throughout the world keep precious metals like gold on hand to ensure foreign debt service in addition to stabilizing inflation. The primary goal of this research is to anticipate the increase and fall in routine gold rates, which will assist investors in deciding whether to purchase or sell gold. Logistics forecasting is critical to the fiscal performance of an organization. The secondary market is derived by examining the dataset including the previous year's gold price. There is concern that these high prices will not be sustainable and will fall despite the fact that several research has been conducted to examine the relationship between the exchange rate volatility and various economic factors. We employed machine learning through python to forecast financial indicators. Keywords: Gold, machine learning, random forest, python, gold price, ETF, dataset

The Growth Effect of External Debt in Nigeria: Does Structural Break Matters?

The volatility in crude oil price in the global market has continuously heightened fiscal deficits in Nigeria, a net exporter of crude oil. Consequently, successive governments have often resorted to external borrowing to augment the available fiscal revenue. This has implications for economic growth. Therefore, this study evaluated the growth effect of external debt and accounted for structural break in the external debt-growth nexus in Nigeria. Annual data spanning 1981-2020 were sourced from global databases and analysed using the dynamic ordinary least square (DOLS) estimator. The result showed that external debt has growth-inhibiting effects on the Nigerian economy and that structural break matter in the analysis of the growth effect of external debt in Nigeria. The results imply that Nigeria needs to lower its external debt due to the high cost of debt servicing that accompany such debt while also improving the revenue-generating ventures in the country.