External Public Debt Research Articles

Education Versus Infrastructure: Is There a Trade-off in an Open Economy with Perfect Capital Mobility?

We present an open economy growth model incorporating various elements of fiscal policy, including government expenditure on education and public capital (infrastructure), budget deficit, internal and external public debt, public consumption, and four tax rates. This detailed description of fiscal policy allows for a systematic study of the relationship between fiscal policy and economic growth. We derive the balanced growth path and analyze its properties, including existence, uniqueness, and stability. The theoretical results are supported by numerical simulations for Poland, with the model calibrated based on data from the years 2010 to 2019. In the baseline scenario, the GDP growth rate converges to 3.98%. However, through appropriate adjustments to fiscal policy, economic growth can be significantly accelerated. Notably, increasing spending on both education and public infrastructure proves to be the most effective way to permanently boost economic growth, even if it requires raising taxes on consumption or increasing public debt.

Cyclicality of public debt in developing countries: Does dependence on natural resources matter?

We revisit the resource curse theory, producing empirical evidence of the importance of natural resources on the cyclical orientation of public debt. Using the Driscoll-Kraay fixed-effects method and panel data from 51 developing countries for the period 1986 to 2020, we show that natural resource rents accentuate the procyclicality of public debt. However, our results suggest that the impact of natural resource endowment in procyclicality does not have the same magnitude when taking into account (i) the disaggregation of public debt, (ii) alternative measures of natural resource rent and (iii) the division of the sample into African and non-African countries. More specifically, natural resource rents amplify the procyclicality of external public debt more than domestic public debt. In addition, we find that while coal and forest rents have no effect on the cyclical orientation of public debt, mineral and especially oil rents do amplify the procyclical nature of public debt. Finally, our results show that the accentuation of the procyclical nature of public debt generated by the interaction between the economic cycle and natural resource endowment is more pronounced in African developing countries than in non-African developing countries. Our results shed new light on the Dutch disease hypothesis, and have relevant policy implications for governments in resource-rich countries wishing to move towards counter-cyclical fiscal interventions.

Fiscal Policy and Economic Growth Nexus: Evidence from Zambia

Purpose: This study examines the short-run and long-run impact of the expansionary fiscal policy on economic growth in Zambia from 1991 to 2021. Materials and Methods: The study employs the Vector Error Correction Model (VECM) and Auto Regressive Distributed Lag (ARDL) Models to examine the short-run and long-run impact of total public expenditure, total tax revenue and total public debt time series data on the gross domestic product (GDP) of Zambia from 1991 to 2021. The Keynesian theory informed our study, which presupposes that the unemployment problem might be solved by boosting government spending on consumption and that government spending was an exogenous factor that contributed to economic growth (Keynes, 1936; Singh & Sahni, 1984). Findings: Both the VECM and ARDL Models show the existence of statistically significant long-run cointegration among public expenditure, external debt, tax revenue and GDP. Specifically, VECM estimates show that for a 1% increase, Tax revenues have a positive long-run significant effect on Zambia’s economic growth of 3.36%, while external debt and public expenditure have significant negative effects on the economic growth of 1.17% and 0.003% in Zambia respectively. The ARDL model estimates indicate that, in the short run, an increase in tax revenue of 1% increases GDP growth by 1.92%, while a rise in government expenditure and external debt by 1% results in a decline in Zambia’s economic growth by 0.003% and 6.14% respectively. Implications to Theory, Practice and Policy: Given the foregoing findings, the therefore study recommends that the Government of Zambia should widen the tax base to mobilize more tax revenues and reduce the budget deficits emanating from high government expenditures. External public debt should also be reduced.

Does private share of public external debt support economic growth in developing countries?

Over the past years, developing countries have increased their borrowing from international private creditors. So far, however, little is known about the effect of public debt owed to international private creditors (private debt) on economic growth in developing countries. This paper analyzes the effects of private debt and its main components (i.e., commercial loans, and bond finance) on economic growth. Using panel data over 1970–2017 and covering 70 low -and middle-income countries, the paper finds a positive and significant effect of private debt on GDP per capita growth rate. Private debt appears to stimulate economic growth mainly by improving the efficiency of investment rather than its volume. However, there are differential effects: bond finance has a positive effect, while the effect of commercial loans on growth is negative. The paper discusses the policy implications of the main findings.

Macroeconomic Imbalance, External Debt, and the Financial System in Laos

External public debt exacerbation and macroeconomic destabilization in Laos are attributed to the subsequent complications of excessive foreign capital investments in the mining, power, and transport infrastructure sectors during the economic boom of the 2010s. This study examines the Lao economy from three perspectives: real sector growth, the characteristics of external fundraising, and the domestic financial system. Our findings suggest that the external debt issue still appears to be under control, real sector growth is expected to be strong in the medium term, and the less‐developed financial system has not realized its potential for fiscal financing and macroeconomic stability.

Зовнішній державний борг україни на сучасному етапі: дорожня карта управління

The article examines the issue of improving the road map for the management of external public debt in wartime. Managing foreign public debt during wartime requires a comprehensive and strategic road map to address such circumstances’ unique challenges and risks. We offer a road map for managing external public debt in wartime, which considers the international debt relief initiatives analyzed in the post-war reconstruction of Europe. This roadmap provides a comprehensive approach to managing Ukraine’s external debt in wartime conditions and provides a framework for decision-making and adaptation to changes in the economic environment. It is aimed at preserving financial stability and ensuring economic stability in the conditions of military conflict. International debt relief initiatives in the post-war recovery of Europe are singled out, which can serve as an example for reducing the debt burden in Ukraine. The only way to ensure external debt security in the war and post-war period in Ukraine is to increase the economic growth rate and carry out reforms within the framework of the implementation of the Recovery Plan of Ukraine, which would increase the credit rating and reliability of the state. Ukraine’s participation in international cooperation is vital in managing external public debt and supporting economic development goals. For Ukraine, the fundamental way to solve the public debt problem will be to achieve stable and adequate economic growth. This will contribute to an automatic reduction of the debt-to-GDP ratio and an increase in tax revenues to the state budget without the need for excessive burden on businesses and individuals. The country’s debt security risks are identified and characterized. Keywords: debt, external public debt, road map, management, state.

International comovements of public debt

AbstractThis study presents evidence of global and regional comovements in public debt and examines their trends and features. We employ a Bayesian dynamic factor model with time‐varying parameters based on the debt‐to‐GDP ratio of 115 countries. We find the global factor accounts for 38 percent of the total variation in the debt ratio worldwide, but its share decreases over time. Countries with more financial openness and a greater share of external public debt are more exposed to global/regional comovements. The assertion that international financial integration encourages higher government borrowing applies primarily to high‐income countries and it does not hold globally.

MONITORING OF THE PUBLIC DEBT OF UKRAINE UNDER THE CONDITIONS OF MARITAL STATE

Abstract. Public debt exists as an economic and legal phenomenon in most countries of the world, as a rule, it is formed as a result of financing the deficit of the national budget. For countries with effective public debt management institutions, it is an engine of rapid economic development. In many countries, the creation of public debt is associated with the government's attempts to improve the socio-economic conditions of people's lives by modernizing infrastructure, developing education, science, health care, improving social welfare, etc. Public borrowing is a source of investment, a means of reducing the negative impact of external factors, and a fairly effective incentive that helps accelerate the growth of the country's economic potential. Thanks to borrowing, our country received additional resources to meet public needs, overcome а certain technological lag in national development, and outline prospects for economic growth. But on the other hand, such borrowings can become a debt burden, since the economic situation in the country does not allow for effective repayment of debts, which in turn only deepens the country's debt problem. Thus, the main problem of public borrowing, in our opinion, is a real threat of reliance on the state and creditors, which has a stable upward trend. In the conditions of war, national obligations, mainly to foreign countries, are growing rapidly. Inefficient management of public debt can lead to economic instability in countries. In our opinion, an increase in external public debt can lead to a decrease in the state authority of Ukraine in the international economic arena and cause mistrust and doubts about the state's ability to ensure the timely fulfillment of its financial obligations.

Patterns and trends in research on external public debt management

This study undertakes a comprehensive bibliometric analysis of publications pertaining to the external public debt management system. The paper aims to study the evolution of scholarly discourse surrounding the external public debt management domain, highlighting contributions, methodologies, and collaborative networks within the field. The methodology encompasses a multivariate approach, incorporating extensive searches across the three major scientometric databases: Google Scholar (PoP), Scopus (in-built Scopus tools, SciVal), and Web of Science (in-built WoS instruments). The bibliometric analysis extends to contextual, evolutionary, and spatial dimensions, allowing for a comprehensive understanding of the identified clusters. The ensuing clusters serve as a roadmap, categorizing publications based on their contextual relevance, evolutionary trajectory, and spatial focus, which enhances the identification of key works in the field, facilitating a nuanced understanding of the current state of external public debt management research. The synthesis of findings from the content-contextual block emphasizes a primary orientation toward understanding the dynamic interplay between external public debt management and economic development. Furthermore, the contextual-temporal block identifies four distinct stages in the evolution of research focus, highlighting the shifting emphasis over time. A discernible pattern of heightened research activity in external public debt management across various countries in recent decades is revealed through spatiotemporal analysis. The interdisciplinary nature of this field is underscored by the dominance of economics, econometrics, finance, business, management, and accounting in dedicated research.

ВНЕШНИЙ ГОСУДАРСТВЕННЫЙ ДОЛГ РОССИИ И ЕГО ВЛИЯНИЕ НА ЭКОНОМИКУ В ТЕКУЩИХ ГЕОПОЛИТИЧЕСКИХ УСЛОВИЯХ

The article presents an analytical review of the state of Russia’s external public debt under the influence of the sanctions policies of Western countries and the formation of prospects for economic development. The main approaches to the interpretation of the concept of external public debt are determined, and an analysis of the dynamics of indicators of the influence of external public debt on economic stability is performed. The results of the study show that despite the comprehensive pressure, the economic situation as a whole is characterized by stability, in turn, the rational policy of government authorities provides the opportunity to contain inflation processes that directly affect both the external and internal state of the state’s economic systems.

FORECASTING UKRAINE'S EXTERNAL PUBLIC DEBT UNDER UNCERTAINTY CONDITIONS

Forecasting external public debt under conditions of uncertainty is important as it allows the country to respond adequately to economic and financial challenges, promotes efficient management of financial resources, formation of a stable financial policy and ensures the country's external debt security, which are critical elements for ensuring economic sustainability and sustainable development. The article's main purpose is to critically analyze and apply existing time-series forecasting methodologies to determine the future values of Ukraine's external public debt in conditions of uncertainty caused by the still unresolved consequences of the COVID-19 pandemic and russia's invasion and full-scale war in Ukraine. Using three forecasting methods, namely trendline extrapolation, exponential smoothing, and autoregressive and moving average models, the paper forecasts the volume of external public debt until 2029 and presents a graphical representation of the debt dynamics from 2011 to 2029. The most pessimistic forecast for the growth of external public debt was revealed when applying the method of data extrapolation based on the trendline. A comparative analysis of the forecast values for the three forecasting methods has revealed common trends in the growth of public debt, as well as the key advantages and disadvantages inherent in each model. Importantly, the article emphasizes the common risks identified in forecasting Ukraine's external debt using time series analysis models, including the problem of achieving only short-term forecasting accuracy and insufficient flexibility taking into account complex and unexpected changes that may arise in conditions of uncertainty and economic instability. The results of the study provide valuable information for policymakers and stakeholders trying to navigate the complexities of managing external public debt under uncertainty.

El impacto de la deuda pública externa en la desigualdad económica en Latinoamérica. Un análisis para el período 2000-2020

El impacto de la deuda pública externa en la desigualdad económica en Latinoamérica. Un análisis para el período 2000-2020

Assessment of Ukraine’s external debt burden under geopolitical instability

Several specific features and circumstances can characterize Ukraine’s policy of external public debt management, and the results are not always unambiguous. The study aims to assess the effect of external public debt on Ukraine’s economy from 2014 to 2022, a period that includes the Crimea annexation, the onset of the COVID-19 pandemic, and the beginning of the open Russian military aggression. To analyze the contemporary state of public debt and assess the degree of external debt burden’s impact on the country’s economy, a factor analysis technique known as the principal components method was used. Via the STATISTICA.12 software, it was substantiated that the debt situation worsens with the growth of debt burden and solvency indicators as their values approach the thresholds. The application of the Kaiser criterion allowed the selection of the most influential indicators (principal components) for assessing the external debt burden. The eigenvalue of the first component (inflation rate) is 4.48, and it explains 50% of the variance; the second component (production of export-oriented goods) has an eigenvalue of 2.43, explaining 27% of the variance; the third component (government spending on military purposes) has an eigenvalue of 1.24, and it explains 14% of the variance.

Analyzing the Signaling Effect of Public Debt to Foreign Investment in Nigeria

This study examines the effects of public debt on foreign investment performance in Nigeria. This was aimed at ascertaining how DPD for domestic public debt, FDB for external public debt, and DS is for fiscal deficit have stimulate the foreign direct investment (FDI) performance in Nigeria for the period 2000 to 2021. Historical data was collated and estimated employing the ARDL- based Ordinary Least Squares (OLS) technique. The empirical results indicate that foreign direct investment responded to domestic debt and debt servicing negatively, but positively to foreign public debt in Nigeria. On the basis of the findings of this study, the following recommendations are made. The government should regularly review their domestic debt policy for reduction, policies that promote more foreign debt be adopted as against domestic debt and government should invest debt on income-generating ventures to reduce the burden of servicing.

Multilateral Debt Relief for Clean Ocean Energy

As states bring more and more offshore wind online and build renewable energy capacity, the promise of large-scale ocean renewables such as offshore wind is not shared equally across all coastal states. This paper examines the situation of coastal states identified by the World Bank as Heavily Indebted Poor Countries (HIPCs) in the context of the boom in offshore wind investment. Specifically, the paper looks at the limited access to renewable energy production exacerbated by ongoing public debt loads, and the almost complete lack of access to clean ocean energy development for the poorest coastal states. Using statistics from the International Renewable Energy Agency and datasets from the Our World in Data project, this paper highlights that the most indebted coastal states only have access to 0.69% of the available renewable energy even though these states represent 4.6% of the global population. In the context of state responsibility for failing to meet climate obligations under the UNFCCC, this paper argues that a sovereign debt relief package offers an equitable remedy to HIPC coastal states, many of whom owe a substantial portion of their GDP as external public debt. The debt service payments would be invested in the upfront capital costs of ocean-based clean energy. These types of debt relief arrangements address international state responsibility and offer the dual co-benefits of long-term economic development and low-carbon sustainability.

External public debt management during the wartime: Case of Ukraine

Public debt plays a crucial role in the economic development of many countries, the effective management and servicing of the external public debt have become a priority in the financial and economic policy of the state, ensuring the stability of its development. The article aims to develop Ukraine’s external public debt management system during the wartime. As a result of the analysis, the key negative consequences of the impact of external debt growth on Ukraine`s economic security were determined, i.e. economic growth slowdown, increased dependence on creditors, increased costs of the public debt servicing, significant reduction in domestic consumption, etc. The developed external public debt management system in the framework of state economic and financial security includes relevant subsystems, principles, functions, objects and subjects, methods. It was substantiated that the appropriate external public debt management system during wartime in Ukraine requires the following additional subsystems: subsystem of crisis planning and response, subsystem of external debt settlement and subsystem for ensuring international cooperation.

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.

Impact of external public debt on economic growth: A case study of Bangladesh

Impact of external public debt on economic growth: A case study of Bangladesh

The Effect of External Public Debt and State Sukuk (SBSN) On Indonesia's Economic Growth: An Autoregressive Distributed Lag Approach

Indonesia's external public debt continues to grow with a ratio of 30.1% of GDP. In the first quarter of 2023, Indonesia's external public debt reached 199.4 billion US dollars or equivalent to 3000 trillion rupiahs. This condition makes Indonesia a debtor country that depend on international creditor countries or institutions. In addition, state sukuk as an alternative to state financing with sharia guidelines also continues to grow, but its performance cannot be equal to external public debt as one of the pillars of Indonesia's economic growth. Therefore, this study is present to analyse the effect of government external public debt paired with state sukuk as an Islamic fiscal variable on Indonesia's economic growth. Moreover, this study also analyses the factors that influence the growth of Indonesia's external public debt. The sample used to analyse the effect of government external public debt and state sukuk on Indonesia's economic growth was taken from the first quarter of 2010 to the first quarter of 2023. This study uses Autoregressive Distributed Lag (ARDL) to find empirical finding of the model. The results of this study indicate that the external public debt variable in the long term has a significant negative effect on economic growth while the state sukuk variable in the long term has no effect on economic growth.

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