Domestic Debt Research Articles

Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation

Pension fund investment is a significant source of finance for the capital market in Nigeria. It increases the availability of funds for firms to acquire for expansion, stimulating economic growth and development. However, high inflation rates can have a negative impact on the effectiveness of pension fund investment in the capital market in Nigeria. This study investigates whether inflation enhances or reduces the effect of pension fund investment on capital market development in Nigeria. Monthly time series data from January 2013 to February 2020 were utilized using the ARDL model. The findings revealed that pension fund investments have a long- and short-run effect on capital market development in Nigeria. Our study also established that inflation reduces the negative impact of total domestic debt securities on total market capitalization both in the long- and short-run, which is the novelty of this study. The study contributes to the Modern Portfolio Theory, thereby establishing the role of inflation in determining the effect of pension fund investment on capital market development in Nigeria. JEL Classification G10, G23

Inquiring asymmetric effects of oil prices, money supply, and domestic debt on consumer prices: an empirical evidence from Pakistan.

Oil prices (OP) may play a significant role in determining inflation in any oil-importing economy and could have an asymmetrical effect as well. Thus, this paper aims to explore the asymmetric influence of OP, broad money supply (BMS), and domestic debt (DD) on the Consumer Price Index (CPI) in the oil-importing economy of Pakistan using the nonlinear autoregressive distributive lag (NARDL) methodology on an annual sample from 1980 to 2021. The long-run results show that increasing OP and BMS have a positive effect on CPI. Similarly, decreasing OP and BMS have a positive effect on CPI. So, increasing OP and BMS is raising price levels, and decreasing OP and BMS is reducing price levels. OP has a positive and symmetrical effect on CPI. However, the BMS has a positive but asymmetrical effect on CPI. Furthermore, the effect of decreasing BMS is found greater than increasing BMS. Moreover, the effect of DD on CPI is also found asymmetrical. The increasing DD has a positive effect, and decreasing DD has a negative effect on CPI. The most of short-run results follow the long-run results. However, energy usage shows a negative effect on CPI in the short run, which is insignificant in the long-run results. This study recommends controlling the money supply and oil prices to reduce consumer prices.

Disaggregated Components of Public Debt and Economic Growth of Pakistan

Purpose
 This study analyze the impact of the disaggregated components of Public debt and its servicing on the economic growth of Pakistan. More specifically, the domestic debt components are Floating Debt, Unfunded Debt and Permanent Debt, and external debt components are Multilateral Debt, Paris Club Debt, and Bilateral Debt.
 Approach and Methodology
 The data has been collected from 1976 to 2021 from World Bank Indicators and Statistics department of SBP and Pakistan Economic Survey Reports. ARDL model is employed on the Karagol Model (2002). 
 Findings 
 The finding as; the floating, unfunded multilateral, bilateral debt’s component and debt servicing impact negatively on the economic growth of Pakistan except Paris Club debt and Permanent debt.
 Policy Recommendations 
 The recommendation of using Permanent Debt among domestic debt components and Paris Club Debt as of external debt components despite using other components of public debt

Effect of external and domestic Public debt on Private investment (A VAR Model analysis)

The objective of this paper is to examine the relationship between private investment and public external and domestic debt for the period of 1980 to 2021. In this study, we checked the unit-root test by using Augmented Dickey-Fuller (ADF) test and Pillips-Perron (PP) test. Moreover, the result of Johansen test states that there is no long-run cointegration between variables. Therefore, this study used VAR-Model for analysis. Furthermore, different type of tests has been applied such as, Shapiro-Wilk W test, Breusch-Pagan/ Cook-Weisberg Test, Breusch-Godfrey LM test, Impulse response analysis and Ramsey Reset test. The estimated result shows a negative and significant relationship between private investment with credits to the private investments by banks and public external debt. However, there is a positive and significant association between private investment with domestic public debt. The Granger Causality Wald test confirms that the most of the previous value of one variable helps to predict the future value of other variables. Hence, it is concluded that the government should revisit their external debt policy to support the country infrastructure, macroeconomic balance and for other public expenditure because this increasing public debt is detrimental to the private investment.

Public Debt and Exchange Rate Stability in Nigeria: An Empirical Analysis

This study examined public debt and its effect on exchange rate stability in Nigeria from 1980 to 2019. The data were subjected to statistical analysis using vector autoregression model. Using data on external and domestic debt servicing ratio to total debt stock, the findings showed no significant relationship between public debt and exchange rate stability in Nigeria within the period, likewise for ratio of external debt servicing to total external debt stock and exchange rate. Finally, domestic debt servicing had no significant relationship with exchange rate. The study concluded that as Nigeria increases external debt servicing, domestic prices increases and this also affects exchange negatively. It is recommended that concerted effort be intensified towards decreasing the level of external debt profile of Nigeria which will invariably decrease external debt servicing. Also, government should intensify revenue drive through exploring other viable sources that do not have repayment plan rather than relying on augmenting yearly budget through public debt accumulation. Keywords: Public Debt, Exchange Rate, Economic Stability, External Debt Servicing Ratio, Nigeria Economy.

Ukraine’s debt security in the context of military conflict

In the context of military conflict, security issues come to the fore in all spheres of state life. As the combat capability of the army largely depends on the financing of its needs, the problem of finding additional financial resources is becoming more acute. However, the economy is currently unable to cope with this task due to the destruction of the material and technical base and logistics routes, military mobilisation of some employees, the outflow of labour resources abroad and other factors resulting from the armed aggression. Therefore, the search for ways to improve debt security in the context of a military conflict is of utmost importance.
 The purpose of the article is to identify the ways to increase the level of debt security of Ukraine's economy. To achieve this goal, the state, dynamics and structure of public and publicly guaranteed debt for 2013–2022 have been analysed. It has been established that over the past ten years, the volume of total public debt has been steadily increasing. This was mainly due to an increase in such components as direct public and external debt. The fastest growth in total public and publicly guaranteed debt was in the years of military operations.
 The analysis of the state debt security indicators has shown a deterioration in the state of debt security and the approach of a debt crisis. Due to the significant complication of the conditions in which Ukraine's economy has been operating over the past year, it is proposed to revise the Medium-Term Public Debt Management Strategy for 2021–2024 to define new targets and approaches in this area. Currently, the Ministry of Finance's main task is to restructure domestic and external debt.
 In order to increase the level of debt security of Ukraine, it has been proposed to initiate the development of an international protocol for debt cancellation for countries affected by armed aggression. In the course of domestic debt restructuring, it has been suggested that the yield on domestic government bonds should be reduced, but this can only be done if monetary policy is changed.

Economic Analysis of Borrowing, Corruption and Inflation in Nigeria

This study investigates the impact of borrowing and corruption on inflation in Nigeria. with annual time series data over the period 1990 to 2022 obtained from CBN statistical bulletin 2022, World Bank Economic Outlook 2022 were employed. This study employed two distinct analytical techniques namely the Error Correction technique. The results indicate that external debt could result in inflation or reduce inflation depending on the prevailing economic condition. On the other hand, domestic debt has a positive influence on the country’s inflationary woes as increase in domestic debt produces increase in inflation. Also the study finds that corruption increase the cost of goods and services and external debt could result in inflation or reduce inflation depending on the prevailing economic condition. The findings also show that domestic debt has a positive impact on inflation as such, increase in domestic debt increase in inflation. The recommends that in order to reap the benefits of foreign debt and reduce the debt load, the Nigerian government must secure political and economic stability and additionally, the nation's ongoing democracy and the battle against corruption should be maintained.

Impact of Government Expenditure on Economic Growth in Nigeria: 1970-2020

In this study, the impact of government expenditure on Nigeria's economic growth rate from 1970 to 2020 is analyzed. OLS was used to estimate the connection between the variables over the long run. The findings show a positive link between the Log of Gross Domestic Products (LGDP’s) log and its initial lag, which is statistically significant. The result reveals a positive association between the (LGDP) and the log of recurrent government expenditure (RGE), as well as between the (LGDP) and the log of first lag of recurrent government expenditure (RGE). A positive link exists between the (LGDP) and the log of capital government expenditure (CGE), but a negative relationship exists between the (LGDP) and the log of first (CGE). The link between the (LGDP) and the domestic debt of the federal government (LFGDD) is inverse, while the relationship between the logs of the first lag of the domestic debt of the federal government (LFGDD) is positive. The R2 determination coefficient is 0.698968. The outcome demonstrates that explanatory factors account for 70% of the variation in the (LGDP). The model is acceptable since the F-statistic 3595.905 with a probability of 0.000000 is significant at 1%. The long-term trend of the explanatory variables, which has increased since the year 1985, is linked to GDP. The outcome presented above also depicts the predicted short-run relationship. Therefore, it is recommended that government expenditure be examined and bolstered to have a positive impact on Nigeria's growth rates.

The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)

The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)

Praktik Kebijakan Utang Dalam Negeri Dan Luar Negeri Indonesia Dalam Tinjauan Ekonomi Islam

Taking debt is not a negative thing, but in practice debt must be protected from usury or interest or other forms of deviation from sharia provisions. This study is intended to explain how Islam views the concept of foreign debt and domestic debt in the context of state debt. The approach used in this research is quantitative with literature study techniques. The results of the study show that in Islam foreign debt and domestic debt are things that are permissible or permissible provided that they are free from elements of usury or other things that are not in accordance with sharia provisions. Therefore, this is an important consideration for the state in making debts both for foreign debt and domestic debt. In addition, in carrying out debt, especially in making policies in the context of state debt, it must be based and reviewed from the urgency of the benefit for the community.Keywords: Debt; domestic debt; Foreign debt; Islamic Perspective;

Local Currency Bond Markets in Africa: Resilience and Subordination

ABSTRACTThis article examines the development and implications of local currency bond markets (LCBMs) in African countries in the context of international financial subordination (IFS). Despite the promotion of LCBMs as a solution to debt vulnerability, there is a dearth of research that offers a systematic empirical examination of their actual benefits along with conceptual explanations as to when and why such benefits may or may not materialize. This is especially true for countries at the bottom of the global economic hierarchy. To explore how the subordination in global production and financial systems shapes LCBM development, the article offers an empirical analysis of selected African countries that combines interviews with policy makers, officials and experts with statistical data. The findings suggest that while LCBMs offer some benefits, such as mitigating risks associated with foreign currency debt, their potential is limited by the structural processes created by IFS, such as their dependence on the global financial cycle, the relatively higher costs of this debt and the sustained constraint on macroeconomic policy making. However, there are also domestic factors which shape how these structural constraints are mediated in the context of LCBM development — in particular, historically developed financial structures of developing countries, the political economy of the state and the structure of production. This study thus contributes to the debate about the developmental benefits of domestic debt market development and the emerging research agenda on IFS.

Debt and Taxes? The Effect of Tax Cuts & Jobs Act of 2017 Interest Limitations on Capital Structure

ABSTRACT The Tax Cuts & Jobs Act of 2017 (TCJA) limited interest deductibility. Using a difference-in-differences design, we show that following the enactment of the new limitations, affected firms significantly decrease their leverage. Specifically, we find that relative to unaffected U.S. firms, affected firms decrease leverage by 7.6 percent of assets, corresponding to $330 million per firm and $84.8 billion for the treatment sample. These results are driven by decreases in long-term domestic debt and by declines in new issuances rather than debt repayment. Additional tests indicate other tax reform elements do not explain the results. We also find that firms not currently subject to limitations on interest but subject to future limitations decrease leverage by about half as much as firms currently subject to the limits. Overall, our findings document an economically significant effect of recent tax reform on firm behavior and advance understanding of how taxes affect capital structure. JEL Classifications: H26; H71; H72.

Accounting for Borrowing and Economic Performance in Nigeria

Accounting for public borrowing and economic performance has been under constant investigation. This study examined the impact of public borrowing on economic performance of Nigeria between 1981 to 2021. The study adopted purposive sampling technique and analyzed using robust ordinary least square (ROLS). The independent variables are, Federal government domestic debt (FDD), Federal government foreign debt (FGFD), cost of servicing debt (CSD), Federal government total expenditure (FGTE) is proxy for dependent variable while, Federal government retain revenue (FGRR) is proxy for control variable. The study reveals that that of FGRR, CSD, FGFD and FGDD have positive and significant influence on the federal government total expenditure. The study was theoretically anchored on Dual Gap Analysis Theory, Adam Smith Theory on Debt and The Ricardo Theory of Public Debt. The study then concludes that Nigeria’s total expenditure has risen astronomically through domestic debt, foreign debt, government retained earnings and debt servicing. The study then recommends very strong internal control should be enforced over utilization of borrowed fund, domestically or externally, as well as investigation of the internal control process of borrowing in Nigeria. Again, debt should be reduced so as to reduce the cost burden of servicing it as debt overhang is imminent in Nigeria. The study recommends the investigation of the internal control process of borrowing in Nigeria for further study.

Legal Protection For Investors of Government Bonds Whose Clauses Do Not Have A Maturity Period

The state in running its government needs funds with the aim of national development and maintaining the stability of the country's economy. One of the funds obtained is through debt instruments, both domestic debt and foreign debt. The government avoids foreign debt, thus optimizing domestic debt with consideration so that the public can participate in raising funds for national development. With this goal, the government issued government bonds or better known as Government Bonds (SUN). Government Bonds are securities in the form of debt recognition letters in rupiah and foreign currencies guaranteed by the payment of interest and principal by the Republic of Indonesia, in accordance with the validity period. However, the SUN issued in 1950 by the government, has no perpetual bond. Unlike the SUN issued today, there is a maturity period and guaranteed by interest and principal payers as stipulated in Law Number 24 of 2002 concerning Government Bonds. Meanwhile, the SUN issued in 1950 has no time period, so it does not provide legal certainty and legal protection to holders of the 1950 SUN, even though the SUN was issued by the same government.

Causality among Oil Revenue, Non-Oil Revenue, Fiscal Risk Factors and Budget Execution Phase in Relation to Debt Overhang and Crowding-Out Theories: Contending Gap Issues

We reviewed literatures on the complex causality among oil revenue, non-oil revenue, fiscal risk factors and budget execution phase in relation to debt overhang and crowding-out theory. The majority of papers surveyed study on investigated the long-run and short-run relationship between fluctuations of oil price ; direction of causality between total revenue and total government spending ; the dynamics of the tax revenue and expenditure nexus, explored the impact of oil prices volatility on the key factors of the government budget, analyse the relationship between public expenditure and debt —little research in the area of the impact of oil price fluctuations on key macroeconomics variables. The evidence provided by the empirical literature is that there are indeed heterogeneous responses to position on complex causality among oil revenue, non-oil revenue, fiscal risk factors and budget execution phase in relation to debt overhang and crowding-out theory. It is detected that most study reviewed did not disintegrated relevant revenue: oil revenue (upstream oil revenues, downstream oil revenues, petroleum profit tax(PPT)); non-oil revenue (company income tax (CIT), value added tax (VAT), personal income tax ) and budget risk factors: oil price volatility (OPV)(OPEC Spot OPV, Brent OPV, West Texas Intermediate OPV), public debt (external public debt, domestic public debt), debt servicing (external debt interest service and domestic debt interest service) on budget execution phase (public expenditure: capital budget expenditure and recurrent budget expenditure). It is recommended that research effort should be made in answering the following research questions: what is the effect of oil revenue on budget implementation (public expenditure: capital expenditure and recurrent expenditure)? How non-oil tax revenue is correlates with budget implementation (public expenditure: capital expenditure and recurrent expenditure)? Of what effect is oil price vola

Public Debt and the Nigerian Economy: 1987 - 2020

This study investigated the impact of public debt on the Nigerian economy from 1987 to 2020. The specific objectives were to determine the impact of external debt on economic growth and to examine the impact of domestic debt on economic growth in Nigeria. The ex-post facto research design was adopted to enable the researcher make use of secondary data to determine the cause- effect relationship of public debt on economic growth in Nigeria. The dependent and independent variables were observed over the period, 1987 to 2020. Empirical investigation was carried out on the basis of time series data collected from the Central Bank of Nigeria Statistical Bulletin.The unit root test performed on each of the variables in the model using the Augmented Dickey-Fuller (ADF) unit root tests showed that the variables were stationarityat level and data analyzed with Ordinary Least Square. (OLS). Findings from this study revealed that external debt impacted negatively on economic growth of Nigeria while domestic debt impacted positively on economic growth of Nigeria. Following these findings, this study recommended that policy makers should discourage external borrowing by all means and encourage domestic borrowing, while integrating appropriate measures to ensure efficient management of domestic debts.

Exploring the Nexus of Domestic Debt and Private Sector Credit in Developing Countries with a Focus on Bangladesh

This research examines domestic debt, private sector lending, and economic development in emerging countries, focusing on Bangladesh. This analysis uses 1960–2022 Bangladeshi secondary data, World Bank World Development Indicators and Bangladesh Ministry of Finance economic statistics. Domestic debt and private sector credit affect emerging nations' economic development, according to this study's theoretical approach. This research examines the link between two factors to add to the literature and provide Bangladesh-specific insights. It is quantitative research that examines domestic debt, private sector credit, and economic development using regression analysis and statistical testing. The conclusions aids Bangladesh's economic development policymakers, economists, and stakeholders. Understanding national debt, financing from the private sector, and the advancement of the country's economy helps policymakers manage debt, allocate credit, and set economic policy. The conducted study also improves theoretical understanding of economic development in underdeveloped countries and illuminates Bangladesh's unique conditions. It examined household debt, private sector lending, and Bangladeshi economic development as well as examines the patterns of economic growth in emerging nations to enhance policy debates and broaden knowledge.

COMPARATIVE ANALYSIS OF THE IMPACT OF DOMESTIC DEBT ON ECONOMIC GROWTH IN NIGERIA AND GHANA

The study compared Nigeria and Ghana's domestic debt (DM) and economic growth (EG) from 2000 to 2021.World Development Indicators, CBN Statistical Bulletin, Ghana Ministry of Finance Annual Debt Statistics, and CBN Annual Report provided secondary data (Time Series) for the study. The study examined Treasury Bills (TBL), Treasury Certificates (TCF), Treasury Bonds (TBD), Development Stock (DST), and Promissory Note (PNT) with one control variable, Interest Rate (INTR), in relation to EG proxied with Real Gross Domestic Product (RGDP) in Nigeria and Ghana. Descriptive statistics, correlation analysis, and multiple regression analysis were performed using E-VIEW version 9.0. The findings indicated The p-value of TBL is 0.4523 for Nigeria and 0.0039 for Ghana, which means that TBL has no effect on RGDP in Nigeria but a substantial effect in Ghana. TCF's p-values of 0.3003 and 0.0700 for Nigeria and Ghana, respectively, are more than 0.05, indicating that TCF has no significant effect on RGDP in Nigeria and Ghana. TBD's p-values for Nigeria and Ghana are 0.0000 and 0.5921, respectively, which is less than 0.05 for Nigeria but higher than 0.005 for Ghana, indicating that TBD has a substantial effect on RGDP in Nigeria but not in Ghana. DST has a substantial effect on RGDP in Nigeria but not in Ghana. Nigeria's p-value is 0.002, which is less than the specified value of 0.05, whereas Ghana's is 0.8106, which is greater than 0.005. Nigeria's p-value of 0.1622 is higher than the set value of 0.05, whereas Ghana's is less than 0.005, indicating that PNT has a substantial effect on RGDP in Ghana but not in Nigeria. INTR's p-values for Nigeria and Ghana are 0.5667 and 0.0371, respectively, which are more than 0.05 for Nigeria but less than 0.005 for Ghana, indicating that INTR has no effect on RGDP in Nigeria but a significant effect in Ghana. Finally, the study finds inconsistent effects of domestic factors on EG in Ghana and Nigeria. The government (GOVT) should borrow mostly from FGN bonds. The outcome shows that FGN bonds greatly benefit EG in Nigeria and Ghana.
 Keywords: Debts, Domestic, Economic, Growth and Bonds.

Deficit financing and Economic Growth: Evidence from Sub-Sahara African Countries

In view of the growing controversy on financing of budget deficits, this study investigates the implications of deficit financing in the Sub-Sahara African countries and how it has impacted on their growth rate. Specifically, it looked at how domestic debt, external debt, external reserves, and budget deficit affects real gross domestic product (RGDP). The study utilized panel data gotten from the statistics databank of the various Central Banks in the Sub-Sahara region and the development indicators of the World Bank for period 1986 - 2021; thus, giving a total observation of 144. The Hausman statistics gave the panel fixed effect regression technique as the most appropriate analytical method, which revealed short run relationship at the 5% significant level. From the result of the study, both external reserves and domestic debt are positive and significant to gross domestic product; external debt is negative and insignificant to gross domestic product; while budget deficit is negative and insignificant to gross domestic product. In conclusion, deficit financing affects the growth rate of most Sub-Sahara African economies. The study recommends among others that both fiscal and monetary agencies of the Sub-Sahara countries should maintain optimum level of domestic debt as it is one of the mechanisms for economic growth. Also, is the enforcement of economic policies to aid increase in external reserves.

The Determinants of East African Economic Growth

This paper focuses on examining the effect of government external debt on economic growth, investigating the effect of interest rate on economic growth, establishing the effect of government domestic debt on economic growth, and examining the effect of budget deficit on economic growth. The study was carried out for three East African countries, Kenya, Tanzania and Uganda, over the study period of 1980-2019. Autoregressive Distributed Lag (ADL) Panel Approach was used to specifically establish the effect of government external debt, interest rate, government domestic debt, and budget deficit on economic growth. Pooled Mean Estimator (PMG) was used to estimate both the general and full sample model. The results showed that in the long run, government external debt and interest rate had negative but not statistically significant effect on economic growth for the three countries. On the other hand, government domestic debt and budget deficit had positive effect but not statistically significant effect on economic growth. The results of the short term showed that government external debt, government domestic debt, and budget deficit had a negative but not statistically significant effect on economic growth for the three countries, while interest rate had a negative and statistically significant effect on economic growth for the three countries. Firstly, in order to achieve a positive economic growth, it is recommended that the East African countries, Kenya, Tanzania and Uganda, should design and implement debt, interest rates, and budget deficit policies to fit and align with other macroeconomics policies. Secondly, they should restrain their expenditure to sustainable levels to maintain a balanced if not surplus budget. Thirdly, they should endeavor to put economic and legal framework in place to eradicate corruption of public funds. Fourthly, they should design and implement policies to broaden tax base to support a balance budget. Fifthly, the governments should avoid a crowding through huge borrowings in the domestic market at the expense of the private sector.