Domestic Debt Research Articles

The Sectoral Nexus in a Small Open Economy: Evidence from Nigeria

The interrelationship between the real, monetary, fiscal, and external sectors of the Nigerian economy is an issue of concern, as it will provide policymakers with insight on which of the sectors is potent in influencing output in the real sector, which little or no attention was given. This study, therefore, examines the interrelationships between these sectors in Nigeria between 2010Q1 and 2021Q1. Structural Equation Model (SEM) was employed. The study finds that monetary and fiscal sectors have a positive influence on the real sector output, while the external sector has a negative influence on the real sector output in Nigeria. It was found that only the monetary sector influenced real sector output significantly. This study recommends effective collaboration between the monetary and fiscal authorities in stimulating aggregate demand, boosting economic activities, and spurring economic growth in Nigeria using money supply, and external and domestic debt.

Пандемия COVID-19 как фактор наращивания государственного долга. Опыт Казахстана в контексте мировой ситуации

One of the main effects of the COVID-19 pandemic is a significant aggravation of the debt burden in most countries of the world, due to increased costs to support the economies. In Kazakhstan, similar problems also caused a significant increase in the volume of public debt and expenses for its servicing, while due to the specifics of the country’s economic model, the channels of influence of the pandemic on the debt sector were more numerous because of the impact of external shocks. The growth of government debt and the debt servicing cost during the pandemic years was affected by such factors as the growth of budget’s expenditures to support the economy; a drop in revenues due to lower oil prices; the devaluation of the tenge and growth of the cost of servicing external debt; increase of interest rates in the domestic debt market. A comparison of the parameters of public debt increase and loss of economic growth based on the ratio of these two indicators is proposed as a generalized indicator of the effectiveness of debt buildup during the pandemic. This approach showed that the debt increase in Kazakhstan was quite effective. Nevertheless, the effects of the fight against the pandemic had a serious negative impact on Kazakhstan’s public finance system, and in the debt sphere the main problem now is the escalation of debt servicing costs, which will be a significant burden on the budget process, at least for the next few years.

Transparent Budget in the System of Public Administration

One of the main effects of the COVID-19 pandemic is a significant aggravation of the debt burden in most countries of the world, due to increased costs to support the economies. In Kazakhstan, similar problems also caused a significant increase in the volume of public debt and expenses for its servicing, while due to the specifics of the country’s economic model, the channels of influence of the pandemic on the debt sector were more numerous because of the impact of external shocks. The growth of government debt and the debt servicing cost during the pandemic years was affected by such factors as the growth of budget’s expenditures to support the economy; a drop in revenues due to lower oil prices; the devaluation of the tenge and growth of the cost of servicing external debt; increase of interest rates in the domestic debt market. A comparison of the parameters of public debt increase and loss of economic growth based on the ratio of these two indicators is proposed as a generalized indicator of the effectiveness of debt buildup during the pandemic. This approach showed that the debt increase in Kazakhstan was quite effective. Nevertheless, the effects of the fight against the pandemic had a serious negative impact on Kazakhstan’s public finance system, and in the debt sphere the main problem now is the escalation of debt servicing costs, which will be a significant burden on the budget process, at least for the next few years.

Effects of Public Debt on Economic Growth in Nigeria

The study was centered on the effect of public debt on economic growth in Nigeria. Given the impact of debt burden on economic growth and other macro-economic parameters, total debt was disaggregated into domestic, external and debt servicing cost. The data was obtained from the Debt Management Office and Federal Office of Statistics. For ease of analysis, the study employed Vector Error Correction Model (VECM) due to the presence of long run relationship identified during data diagnosis. The findings confirmed that domestic debt in the short run is inversely related to growth but positively related in the long run provided it is done with moderation where the total domestic debt did not outweigh 30% of the total domestic bank deposits against crowding out effects. The impact of external debts was both negatively related to economic growth at both short run and long run period due to possible wrong application of loans to project types. It was also important to note that debt servicing posits a major evil plaguing the economy of the country. In summary, the findings confirm that public debts significantly do affect economic growth and against their justification for infrastructural development on fixed capital formation, it was also revealed that it is non-incentive to economic growth, due to wrong resource allocation and timing of such fixed capital investment for appropriate economic growth drive and stimulation. The coefficients of most of these parameters are all statistically significant at 5% confident level. Policy recommendation from the study is that government should only borrow on items that can repay, what the loan was collected for, in the first place. Keywords; Crowding effects, debt financing, debt overhang, Fixed capital formation, economic growth, Nigeria economy

ANALYSIS OF RELATIONSHIP BETWEEN GOVERMENT DOMESTIC DEBTS AND BASIC MACROECONOMIC INDICATORS IN TURKEY

Granger (1969) nedensellik testi için literatürde yararlanılan algoritmaların çoğu bir istatistiksel anlamlılık testine dayanmaktadır. Modelde çok sayıda değişken olması, Granger nedensellik test istatistiklerinin hesaplanmasında büyük sorunlar oluşturabilmektedir. Lozano vd. (2009), Granger nedensellik yöntemleri için herhangi bir zaman serisinin gecikmeli değerleri arasında grup yapısının uygun bir şekilde formüle edilmesinin önemli olduğunu vurgulamışlardır. Bahadori ve Liu (2013) ise Granger nedensellik yaklaşımının, yetersiz sayıda gözlemin olduğu yüksek boyutlu bir veri seti için tutarlı sonuçlar veremeyebileceğini belirtmişlerdir. Granger nedensellik testlerinde yaşanan bu gibi sorunlara çözüm getirmek amacıyla çeşitli cezalı tahmincilere dayalı Granger nedensellik yaklaşımları geliştirilmiştir. Literatürde cezalı tahmincilere dayalı Granger nedensellik yöntemlerinin iktisadi değişkenler bağlamında uygulamaları çok azdır. Bu çalışmada, Türkiye’de kamu iç borçları ile bazı temel makroekonomik göstergeler arasındaki ilişki cezalı tahmincilere dayalı Granger nedensellik yöntemleri aracılığıyla analiz edilmiştir. Elde edilen LASSO GN, elastik net GN ve elastik net CGN testlerinin sonuçlarına göre, İÇBORÇ ile ENF, FAİZ, DK, SÜE, Mo ve FDHAR değişkenleri arasında iki yönlü nedensel ilişkilerin olduğu saptanmıştır.

External Debt Burden and Infrastructural Development Nexus In NIGERIA: An Ardl Approach(1981-2020)

This study focused on external debt burden and infrastructural development nexus in Nigeria using data spanning between the periods 1981 to 2020 by employing the use of Autoregressive Distributed Lag Model (ARDL) and granger causality test as the major statistical techniques of analysis.From the findings,the coefficient of error correction term shows that about 70 percent of the discrepancy between the actual and the long run or equilibrium value of infrastructural development is corrected or eliminated each year. The coefficient of determination (R2) is 0.680 which shows that about 68 percent variations in the infrastructural development were explained by the independent variables. The Augmented Dickey Fuller (ADF) unit root test shows that all variables were stationary at first difference. The results for the Bounds test reveal that there is a long run relationship among the variables. This is because the F-statistics value (5.194) is greater than upper Bounds critical values at 5% level of significant. The ARDL results show that external debt, domestic debt and inflation rate have a negative impact on infrastructural development in the long run while exchange rate and interest rate has a positive effect on infrastructural development in the long run. Also, domestic debt and exchange rate were found to have a significant impact on infrastructural development while external debt, inflation rate and interest rate were found to be insignificant in the long run. Furthermore, the granger causality test results indicate while there is no causality between external debt and infrastructural development, there seems to be a unidirectional causality between domestic debt and infrastructural growth in Nigeria. The study concludes that federal government of the country should cut down excessive borrowings and that the existing ones are invested in projects that would eventually generate enough returns to defray such debts accordingly. Also, an adoption of policy framework that will ensure macroeconomic stability such as price stability, job creation, increased output, political stability, etc. becomes fundamental in getting rid of heavy reliance on external debt in the country.

Analysis of how Economic Growth in Developing Countries is Influenced by Public Borrowing: A Case Study of Rwanda

Purpose: This study sought to analyze how economic growth in developing countries is influenced by public borrowing referencing on Rwanda as a case study. 
 Methodology: The study used time series data from 1980 to 2018. The study used domestic debt and external debt to analyze how it influences Rwanda’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the National Bank of Rwanda and the debt office in Rwanda. The study employed multiple regression model to identify the relationship between the dependent variable (GDP) and the independent variables (domestic debt and external debt). The t-test was used to confirm the formulated hypotheses at the 5% significance level.
 Findings: The study found out that a positive relationship exists between IMF Loan and Rwanda’s gross domestic product, while a negative relationship exists between domestic debts and Rwanda’s gross domestic product, which violates the Keynesian theory of public debt.
 Conclusion: The study concludes that both domestic and external debt significantly affect economic growth in Rwanda.
 Recommendation: The study recommend that developing countries should develop a good structure of Debt Management Office including a plan for capacity building in order to make its proper debt strategy analysis without external support. The study also recommend developing countries to reduce reliance on internal borrowing to reduce competition between citizens and the government which can reduced economic growth. Furthermore, the study recommend developing countries to account for public debts and ensure that such debts are solely acquired for economic purposes rather that political purposes.

ÜÇÜZ AÇIK BASKI ENDEKSİ VE MAKROEKONOMİK DEĞİŞKENLER ARASINDAKİ İLİŞKİNİN ANALİZİ: TÜRKİYE UYGULAMASI

The aim of this study is to create a Triple Deficit Pressure Index for the Turkish economy in the period of 1998 - 2020 and to examine its relationship with selected macroeconomic - financial indicators by ARDL method. The Triple Deficit Pressure Index is valid in the Turkish economy. ARDL Bound test results are statistically significant. Borsa İstanbul 100 Index Value, Banking Sector Credit Volume, Current Account Deficit, Domestic Debt Stock, Export Import Coverage Ratio, Manufacturing Capacity Utilization Rate and USD / TRL buying rate are statistically significant and long-term relationship occurs between significant variables and the Triple Deficit Pressure Index. According to Granger Causality test results, there is one-way causality from Banking Sector Credit Volume and Industrial Production Index to Triple Deficit Pressure Index.

Relationship between Domestic Debt and Economic Growth of Nigeria

Nigeria is one of the most highly indebted countries that have low income growth and low per capita income. Government seems to lack the potentials to generate revenue domestically to meet up with developmental goals and other national in order to attain the desire economic growth. Hence government resorts to borrowing. The paper examines the relationship between domestic debt and economic growth in Nigeria. The results reveal that domestic debt does not have significant impact on economic growth in the short run but significant negative impact in the long-run. The government should therefore monitor the disbursement of loan on real growth- enhancing capital projects instead of recurrent expenditure. Also, government should formulate policies aimed at increasing her ability to generate more revenue to meet her expenditure demand.

Relationship between Domestic Debt and Economic Growth of Nigeria

Relationship between Domestic Debt and Economic Growth of Nigeria

An Empirical Analysis of Russian Regions’ Debt Sustainability

This paper investigates the impact of the moderate growth of government borrowing on debt sustainability in 11 Russian regions over about 10 years, starting in 2010. The current study aims to assess the debt sustainability of the Russian region’s budget by determining Euclidean distance budget constraints and cluster analysis. This study is based on the methodology of hierarchical cluster analysis, which makes it possible to isolate regions of accumulation of objects from the aggregate data and combine them into homogeneous segments. The central hypothesis of this study is that by using this method, it is possible to increase the accuracy of the values that limit budget constraints in a region’s financial system. This study, using open data from the Federal State Statistics Service, is based on a database of statistical, financial, and economic indicators of the Russian economy. The calculations include about 45 macroeconomic indicators, which reflect the ratios of socio-economic development of the region’s financial system. The methodology described in the paper for assessing the debt sustainability of budget policy proves the need to calculate six indicators and determine the debt limits for the regions of each cluster. It finds a need to reduce the high debt burden of 46% of the regions belonging to the Northwestern Federal District. Confidence intervals for the debt limit suggest that the negative growth effect of high debt may start from levels of around 5% of the debt-to-GDP ratio and about 43% of the debt-to-revenue ratio. The results indicate that regions with a high level of debt sustainability include St. Petersburg city, the Leningrad region, and the Kaliningrad region. From a state debt policy perspective, the results provide additional arguments for debt reduction for the Republic of Komi, the Republic of Karelia, the Arkhangelsk region, and the Pskov region. The general conclusion of the study boils down to the need to reduce the debt burden of the budgets of some regions of the SFZO, as well as to the need to change the upper limits of debt, which are equally set for all regions by the Budget Code of the Russian Federation, to differentiated values of public domestic debt, taking into account the results obtained in the study.

The Malikane System in Ottoman Tax Law

The malikane system can be defined as a method of domestic debt in the context of Ottoman tax law. As a result of the political and military developments in the Ottoman Empire, it was understood that the tax farming method, which was primarily improved to meet the cash need of the state, caused some problems in practice, and the malikane system was adopted in order to eliminate these deficiencies. At the beginning of the innovations coming with this system is the tax farming duration’s being lifelong. What is expected from the malikane owner is to protect both the tax resource with the right of tenancy and the raayah during this period. Besides, it is to pay annual taxes regularly in the amount determined by the state with the mu‘accala price that has to be paid at the beginning. It is thought that malikane system met the cash needs of the state to a large extent when it was implemented, however, it is seen that this system has some problems in practice like tax farming but provides the expected benefit. For this reason, the Ottoman administration moved into the ashām system. In this study, the theoretical framework of the malikane system, its appearance in the 49th and 50th Konya Registries corresponding to the years when it started to be implemented and how it is reflected in practical applications are discussed.

ВПЛИВ БОРГОВОЇ ПОЛІТИКИ УРЯДУ НА РОЗВИТОК ЕКОНОМІКИ УКРАЇНИ

The influence of the government's debt policy on the development of Ukraine's economy is analyzed. It is determined that today almost all indicators of debt stability in Ukraine exceed the critical limit, beyond which the state loses the ability to solve debt problems on its own. Thus, during 2014–2021, the domestic public and state-guaranteed debt of Ukraine increased in hryvnia equivalent by 3.9 times and as of the end of 2021 amounted to UAH 1,111.6 billion. The increase in debt was primarily due to direct public debt, which increased 4.1 times during the analyzed period. It is concluded that the scale of government borrowing in Ukraine makes it a threat to the economy, because without a change in the current government debt policy, the risk of the government's inability to meet its obligations to repay and service the debt will increase. Emphasis is placed on rethinking the country's economic policy in the direction of limiting the country's debt dependence, improving the structure of balance of payments and foreign trade balances, a balanced approach to the liberalization of relations in the foreign economic sphere and attracting foreign investment. A detailed analysis of trends in the issuance of domestic and external government bonds, as well as attracting debt financing from international financial organizations. The study of trends, and most importantly the structure of domestic government bonds, suggests that their growth is due to the need to finance not only the state budget deficit, but also the shortcomings and miscalculations of monetary and debt policy, as well as protectionist interests of individual businesses. Emphasis is placed on the fact that a significant share of non-residents' funds in domestic government bonds increases the country's exchange rate and financial vulnerability and is a factor that allows non-residents to influence the foreign exchange market and, accordingly, the national currency and international reserves of Ukraine.

The Influencing Factors of Financial Satisfaction by Moderating Financial Literacy

One of the areas most affected by this pandemic is the financial sector, starting from finance in the macro (world) scope to the micro (family) sphere. The family finance sector is the basic support for the country's economic progress. Micro-scale financial policies are primarily aimed at underprivileged families in the form of direct cash assistance. This study aims to determine the effect of financial distress and domestic debt on financial satisfaction with financial literacy as a moderator. This research was carried out on lecturers and education staff at Hasyim Asy'ari University Tebuireng Jombang, using quantitative methods. Hypothesis testing using PLS-based SEM, with a research sample of 50 respondents. The results of this study state that 1) Financial distress influences financial satisfaction; 2) Domestic debt is not proven to influence financial satisfaction; 3) Financial literacy influences financial satisfaction; 4) The interaction between domestic debt and financial literacy has no effect on financial distress; 5) The interaction between financial distress and financial literacy has no effect on financial satisfaction.

Public Debt and the Nigerian Economic Development (1990 – 2019)

The huge infrastructure deficit in Nigeria underscores the need for capital mobilization required to finance activities and ensure sustainable growth and development. This study examined the effect of public debt on the economic development of Nigeria covering the period 1990-2019. Domestic public debt, External public debt, Total public debt, and public debt servicing represented independent variables. Per capita income was the dependent variable. Ex post facto research design was adopted for the study. Data was sourced from the Central Bank of Nigeria Statistical Bulletin and Globaleconomy.com. The study used Augmented Dickey-Fuller (ADF) unit root test to test for the stationarity of the variables while the Johansen cointegration test was used to establish that a long-run relationship exists among the variables. Ordinary Least squares (OLS) and Error Correction Model (ECM)) were the tools used for analysis. Results showed that domestic debt and external debts each has a negative and statistically significant effect on per capita income while total public debt and public debt servicing showed a positive and statistically significant effect on per capita income respectively. Based on the findings, the study concluded that neither external debt nor domestic debt has been able to singly spur economic development while total public debt which is the combination of domestic and external public debt positively drive economic growth, thereby, improving the per capita income of the citizens in Nigeria.

Optimal bailouts and the doom loop with a financial network

Banks usually hold large amounts of domestic debt which makes them vulnerable to their own sovereign’s default risk. At the same time, governments often resort to costly bailouts when their banking sector is in trouble. We investigate how the network structure and the distribution of sovereign debt ownership within the banking sector jointly affect the optimal bailout policy under this “doom loop”. We argue that rescuing banks with high domestic sovereign exposure is optimal if these banks are sufficiently central, even though that requires larger bailout expenditures than rescuing otherwise identical low-exposure banks. Our model illustrates how the “doom loop” exacerbates the “too interconnected to fail” problem.

A Journey in the History of Sovereign Defaults on Domestic-Law Public Debt

<ns2:p>We introduce a novel database on sovereign defaults that involve public debt instruments governed by domestic law. By systematically reviewing a large number of sources, we identify 134 default and restructuring events of domestic debt instruments, in 52 countries from 1980 to 2018. Domestic-law defaults are a global phenomenon. Over time, they have become larger and more frequent than foreign-law defaults. Domestic-law debt restructurings proceed faster than foreign ones, often through extensions of maturities and amendments to the coupon structure. While face value reductions are rare, net-present-value losses for creditors are still large. Unilateral amendments and post-default restructuring are the norm, but negotiated pre-default restructurings are becoming increasingly frequent. We also document that domestic-law defaults typically involve debt denominated in local currency and held by resident investors. We complement our analysis with a collection "sovereign histories", which provide the fine details about each episode.</ns2:p>

EFFECT OF FISCAL POLICY ON FOREIGN DIRECT INVESTMENT INFLOWS IN KENYA

Purpose: The purpose of this study was to assess the impact of fiscal policies on Kenya's foreign direct investment inflows. The independent variable included fiscal policy with external public debt, domestic debt, infrastructure and tax.
 Materials and Methods: The research attempts to explain the FDI inflows in Kenya and was calculated quarterly on the basis of FDI inflows in the nation. For 20 years (January 1998-December 2017) secondary data were gathered annually. In order to investigate the association between the variables the study utilized a descriptive research methodology using a time series model. For data analysis objectives, Python software was utilized.
 Results: Regression of coefficients results shows that government expenditure on infrastructure and FDI are positively and significantly. It was also revealed that external debt and FDI are negatively and significantly related. Domestic debt and FDI are negatively and significantly related. The results regression results showed that taxation measured as tax revenues and FDI are positively and significantly related.
 Unique contribution to theory, practice and policy: The study findings validate the internalization theory. Findings indicate that the theory is applicable in the study of investments. In addition, the findings may in future serve as platform for additional studies in the same subject for other academics, students and researchers. Investors would benefit from the recommendations set out in this study to attract more FDI investment by implementing trade-balanced actions, limiting corruption, implementing income-collection tax policies and promoting international trade to ensure competitiveness in Kenyan products.

Impact of public debt profile on economic growth: Evidence from Nigeria

An excessive increase in public debt characterizes the contemporary development of the global economic and financial system. The paper aims to examine the short- and long-run impact of state debt on economic growth in Nigeria. The model was estimated using an autoregressive distributed lag (ARDL) bounds testing method to co-integration for the long-run investigation. At the same time, the contemporaneous dynamics were explored using an unrestricted error correction model. The data were collected from the Central Bank of Nigeria’s statistical bulletins and annual reports, and it spanned the years from 1990 to 2020. The study uncovers evidence of a long-term link between the study variables. In addition, the study finds that all the explanatory is statistically significant. Specifically, economic growth is significant and negatively responsive to changes in external debt by 0.19% and debt servicing by 0.07%, contrary to its positive response to changes in domestic debt and exchange rate by 0.27% and 0.18%, respectively. The paper, therefore, recommends that government may consider more domestic borrowings to foreign borrowings that should only be resorted to when it is indispensable. Moreover, the government should also strive to balance loan servicing and the economic sustainability.

CONTRIBUTION OF ALTERNATIVE THEORIES OF MONEY TO THE CREATION OF A MODEL OF THE MONETARY SYSTEM IN RUSSIA (LATE XIX — EARLY XX CENTURY)

The economic and political instability of the present time in the world, being a reflection of the complex process of transition to new post-industrial technologies, increases instability in the sphere of monetary relations. The article aims to investigate the conceptual differences that contributed to the formation of alternative approaches in the theory of money at the turn of the XIX–XX centuries during the discussion of the prospects for the transition to credit circulation in extreme economic conditions. Attention is drawn to the fact that the problem of choosing a model of the monetary system, metallic or monetary, becomes the most urgent during the transformation of the economy.
 
 The article provides a comparative analysis of the key provisions of the nominalist, quantitative, credit and conjunctural theories of money, their conceptual differences in understanding the nature, functions of banknotes and their role in price formation. The features of the conjunctural theory of money that distinguish it from the provisions of alternative concepts, market and state mechanisms for regulating money turnover are clarified. Algorithms for the formation of the general level of money prices in the conjunctural theory of money by M.I. Tugan-Baranovsky are considered. It is shown that the concept of nominalism, which expresses the interests of the state, justifies the need to use paper banknotes as the most effective financial resource of the government in emergency economic situations and the demonetization of gold.
 
 The proposals of the leaders of the modern theory of money concerning the forced issue of "sovereign currency", weakening the national currencies of other countries, are analyzed. It is shown that the incorrect interpretation of the categories of government bonds and national currency by the leaders of the modern theory of money in comparison with the classical provisions narrows the field of scientific analysis, leads to a confusion of the concepts of state interest-bearing and interest-free domestic debt, and destabilization of the monetary and economic system as a whole.
 
 The contribution of alternative concepts of money to the creation of a theoretical model and structure of the Russian state monetary system of the early twentieth century is shown. It is concluded that during periods of acute shortage of budgetary resources, there is a revival of the arguments of the nominalist theory of money in new economic conditions.