Debt Stock Research Articles

External Debt and Economic Growth Relationship in Nigeria: A Reconsideration

External Debt and Economic Growth Relationship in Nigeria: A Reconsideration

DOMESTIC ORIGINAL SIN OF SOVEREIGN DEBT IN TÜRKİYE

The study analyzes the original sin of sovereign debt in Türkiye with a focus on domestic original sin. Eichengreen and Hausmann (1999) define original sin as the inability of a country to borrow in its own currency in the international market, while the issuance of foreign currency debt in the domestic market is defined as domestic original sin (Eichengreen, Hausmann, and Panizza, 2003). In this context, the structure of the debt portfolio was evaluated based on the indicators developed by Eichengreen, et al. (2003) and its simplified version widely used in the literature. Based on the analysis of the sovereign debt portfolio, it has been concluded that although the debt stock to GDP ratio is relatively low in Türkiye, the domestic original sin has reached historically high levels and currency mismatch is significant.

Seçilmiş Değişkenlerin Dış Borç Stoku Üzerine Etkisi: Türkiye Örneği

The aim of this study is to examine the long-term relationship between trade openness, fixed capital formation, GDP per capita and general government final consumption expenditures on external debt stock, using annual data for the period 1994-2021 in Türkiye, with Johansen cointegration analysis. In this context, FMOLS and CCR coefficient estimators were used to determine the long-term relationships of the variables. According to the findings obtained from the FMOLS and CCR coefficient estimators, the general government final consumption expenditures affected the external debt stock the most among the variables examined in Türkiye in the 1994-2021 period. It was followed by GDP per capita, fixed capital formation and trade openness. In summary, while fixed capital formation, trade openness and general government final consumption expenditures increase Türkiye's external debt stock, GDP per capita decreases the external debt stock in the same economy.

Sri Lanka’s Foreign Exchange Crisis: An Examination of Causality Dynamics, Shedding Light on Suggestive Way-Out Strategies

The present research endeavoured to undertake a diagnostic analysis pertaining to the foreign exchange crisis faced by the Sri Lankan economy, intending to identify drivers of the crisis and to throw light on possible strategies to overcome the crisis. An extensive literature survey was conducted, followed by a descriptive analysis based on available data. Trend analysis, deploying graphical method, was adopted as the main analytical technique, and the results were interpreted using political economic reasoning. The outcomes of the study revealed that Sri Lanka has been experiencing persistent current account deficits as well as increasing foreign debt stock since 1977, the year in which economic liberalisation policies were implemented. In that respect, the Sri Lankan crisis closely resembled that of the Indian crisis more than those explained by the other crisis models found in literature. It could thus be inferred that the persistent trade and current account deficits owing to uncontrolled imports ever since liberalisation, and the resultant accumulation of foreign debt, have been the drivers of the foreign exchange crisis in Sri Lanka, while weak and undisciplined public finance policies, failure to move into high value-added and strategic industrialisation and wide income inequality would have been possible support factors. Therefore, the research outcomes yielded caution signals if policy makers consider availing further liberalisation of the economy as the remedial strategy to surmount the present crisis.

Understanding the Growth Implications of Debt Servicing in Nigeria

This study examined the effect of external debt servicing on economic growth in Nigeria. The specific objectives are to determine the effects of multilateral debt service, total debt service and external debt stocks on gross domestic product (GDP) growth. Time series data required for the investigation were sourced from the World Development Indicators and International Debt Statistics. The data analysis techniques include descriptive statistics, unit root tests, Johansen cointegration test and parsimonious error correction model (ECM) in addition to the post- estimation tests. The unit root results showed that all the variables are stationary at first difference. In other words, this finding revealed that the variables are integrated into order one [I(1)]. Evidence of two cointegrating equations was established from the Johansen cointegration test results, which implies that GDP growth has a long-run relationship with multilateral debt service, total debt service and external debt stocks. The parsimonious ECM showed that multilateral debt service has a negative and significant effect on GDP growth. This implies that an increase in multilateral debt service is detrimental to economic growth. The results further showed that total debt service and external debt stocks negatively and significantly impacted GDP growth. This finding indicates that Nigeria has not productively utilized the growing stocks of foreign loans to enhance its contributions to economic growth. The error correction parameter (-0.432) is negative and significant, which suggests that short-run disequilibrium can adjust to a long-run equilibrium position at a speed of 43.2 per cent. Based on the findings, this study concludes that debt servicing undermines the growth of the Nigerian economy. Thus, it is recommended that among others the government should gradually reduce its debt stock to reduce the total debt service obligations and make more resources available for economic grow

Energy efficiency investment in a developing economy: financial development and debt status implication

Purpose This study aims to assess financial development and debt status impact on energy efficiency in Nigeria as a developing economy. Design/methodology/approach This study combined the autoregressive distributed lag (ARDL), fully modified ordinary least squares and canonical cointegration regression analytical methods to estimate the parameters for energy efficiency policy recommendations. Secondary data between 1990 and 2020 were used for the analysis. Findings The result confirms the long-run nexus between energy efficiency, financial development and total debt stock. Furthermore, the ARDL estimates for this study’s key variables show that financial development promotes energy efficiency in the short run but hinders long-run energy efficiency. Total debt stock limits energy efficiency in Nigeria in short- and long-run periods. Research limitations/implications The limitation of this study is that the scope is limited to Nigeria as a developing economy. The need to support energy efficiency projects is a global call requiring cross-country analysis. Despite this study’s focus on Nigeria, it provides useful insights that can guide energy efficiency policy through the financial sector and debt management. Practical implications The financial sector must ensure the availability of long-term credit facilities to clean energy investors. The government must maintain a sustainable debt profile to pave the way for capital expenditure on clean energy projects that promote energy efficiency. Originality/value The environmental consequences of energy intensity are being felt globally, with the developing countries most vulnerable. The cheapest way to curb these consequences is to promote energy efficiency to reduce the disastrous effect. Driving energy efficiency requires investment in energy-efficient technology but the challenge for developing economies, i.e. Nigeria’s funding, remains challenging amid a blotted debt profile. This becomes crucial to investigate how financial sector development and debt management can accelerate energy-efficient investments in Nigeria.

Is the performance of shares in the stock market affected by monetary policy change and the transmission channel of exchange rate? - The case of Turkey

In this study, in case that the objectives are price and financial stability, it is investigated whether the transmission channel based on exchange rate due to changes in monetary policy affects the performance of shares due to external debt stock. Borsa Istanbul is chosen as the stock market and the performance of nine sectors is examined during the high and low foreign exchange rate periods due to monetary policy change. The performance of the sectors is defined by portfolio performance measurement methods, and the TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) analysis based on entropy is used for multi-criteria decision making. It is concluded that the monetary policy change affects the performance of the sectors, which constitutes a substantial proportion of external debt stock.

МІЖНАРОДНІ ФІНАНСОВІ ПОТОКИ В КРАЇНИ ЦЕНТРАЛЬНОЇ ТА СХІДНОЇ ЄВРОПИ ПІСЛЯ ГЛОБАЛЬНОЇ ФІНАНСОВОЇ КРИЗИ 2008 РОКУ: СТРУКТУРНІ ОСОБЛИВОСТІ

In our study, we will focus on determining the dynamics and structural changes in the flows of foreign capital to the countries of Central and Eastern Europe after the global financial crisis of 2008. For the analysis, we selected a group of Central and Eastern European countries that joined the European Union: Bulgaria, Romania, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, Lithuania, Latvia, as well as the post-Soviet European countries - Ukraine, Belarus, Russia and Moldova. We chose three periods for the study: the first period from the beginning of liberal reforms to the present (1991-2021); the second period from macroeconomic stabilization to the global financial crisis (1994-2008); the third period covers the post-crisis period before the start of the Russian-Ukrainian war (2009-2021). The article examines the structure of the inflow of foreign capital to the countries of Central and Eastern Europe before the global financial crisis of 2008 and in the period after it. It was determined that the share of direct and portfolio foreign investments in the structure of foreign capital increased significantly in the post-crisis period. In the post-crisis period of 2009-2021, there was a significant increase in the average value of the stock of foreign direct investment to 41.2% of GDP and a more than two-fold decrease in the volatility of FDI inflows, which amounted to 5.2, as well as a 1.5-fold increase in portfolio foreign investments and a drastic reduction in the volatility of this type of foreign capital to 2.69. As for other investments, they remained at the pre-crisis level, but volatility decreased by a quarter. An econometric study of the influence of the stock of foreign direct investment and foreign debt per worker on the level of economic well-being in the CEE countries was conducted, which proved the strengthening of the role of foreign direct investment after the global financial crisis and the lack of influence of foreign debt. In our opinion, the governments of the CEE countries have focused on the economic policy of slowing down foreign capital flows and avoiding financial risks associated with foreign debt flows. Today's geopolitical tensions, the Russian-Ukrainian war will contribute to the deepening of these processes, increasing the influence of states on limiting international financial flows.

Macroeconomic Instability in Nigeria; Examining the Roles of External Debts

This study investigates the effects of external debts on the index of macroeconomic instability, which incorporate multiple macroeconomic indicators in a single index, so as to present a more robust findings as against the studies in the literature which investigates the effects of debts on each of the macroeconomic variables on individual bases. After generating the single index of instability, the study employed the Autoregressive Distributed Lag (ARDL) for the analysing under four different models which interchange four different measures of external debts. The results show that external debt stock to GDP ratio exerts negative effects on macroeconomic instability in the short and long run. Debt-to-export ratio is not significant on macroeconomic instability both in the short and long run. It is also established that debt-to-revenue has negative and significant impact on macroeconomic instability in the short run, but not in the long-run. In contrast, the results show that debt service-to-revenue exerts a positive and significant effects on macroeconomic instability both in the short and long-run. This implies that increase in the proportion of revenues that are expended on debt servicing worsen macroeconomic instability in Nigeria both in the short and long run.

Analyzing the Impact of Foreign Capital Inflows on Domestic Savings in Pakistan: A Comprehensive Time Series Investigation

This research delves into the ramifications of foreign capital inflows on domestic savings within the context of Pakistan. Utilizing annual time series data spanning from 1972 to 2022, this study employs the Auto Regressive Distributed Lag (ARDL) methodology alongside causality analysis. The findings underscore that factors such as labor force participation rate, gross fixed capital formation, deposit interest rate, foreign direct investment, trade, GDP growth, and foreign remittances exert a favorable influence on gross domestic savings over the long term. Conversely, variables encompassing age dependency, external debt stock, and net official development assistance exhibit a detrimental impact on gross domestic savings. Furthermore, the outcomes derived from the Granger causality test reveal the absence of causal relationships between foreign direct investment, remittances, trade, external debt, and gross domestic savings. Notably, unilateral causality is identified solely between net official development assistance and gross domestic savings.

Analyzing the Impact of Foreign Capital Inflows on Domestic Savings in Pakistan: A Comprehensive Time Series Investigation

This research delves into the ramifications of foreign capital inflows on domestic savings within the context of Pakistan. Utilizing annual time series data spanning from 1972 to 2022, this study employs the Auto Regressive Distributed Lag (ARDL) methodology alongside causality analysis. The findings underscore that factors such as labor force participation rate, gross fixed capital formation, deposit interest rate, foreign direct investment, trade, GDP growth, and foreign remittances exert a favorable influence on gross domestic savings over the long term. Conversely, variables encompassing age dependency, external debt stock, and net official development assistance exhibit a detrimental impact on gross domestic savings. Furthermore, the outcomes derived from the Granger causality test reveal the absence of causal relationships between foreign direct investment, remittances, trade, external debt, and gross domestic savings. Notably, unilateral causality is identified solely between net official development assistance and gross domestic savings.

Türkiye’de Kredi Temerrüt Takası (CDS), Merkezi Yönetim Dış Borç Miktarı ve Cari Açık Arasındaki İlişki

Debt ratios are often a static indicator of the borrowing situation in an economy. Since the debt burden, interest burden, or ratio to the national income of an economy shows the current situation, it does not provide health information for the future. Dynamic indicators are needed to understand potential debt relationships in the future. CDS spreads, which are based on a swap transaction and gained importance after the global crisis, have recently been used as a dynamic debt ratio. There are basically two reasons for this situation. The first reason is that static analyses are considered insufficient by market participants. The other reason is that CDS spreads clearly reveal the risk cost for the lender. The reason for the current account deficit and external borrowing can be sometimes the increased need for foreign exchange in a country. When considering foreign exchange and interest rate swaps within this framework, the relationship between the current account deficit and CDS spreads becomes more pronounced. This is because, among the reasons for foreign exchange inflows and outflows, there are factors such as foreign trade transactions, external borrowing, and swap transactions. The study analyzed the variables of central government external debt stock, current account deficit, and CDS spreads using wavelet coherence analysis in the R Studio program for the period of 2008:1-2023:3. The main reason for choosing this analysis method is that it obtains findings for the entire time period included in the analysis and increases the data set to very high dimensions with simulation. This characteristic of the analysis enhances the validity level of the findings. The study found no relationship between the central government external debt stock and CDS spreads in Türkiye, except for the two years following the 2008 global financial crisis. Additionally, a positive relationship was identified between the current account deficit and CDS spreads. These findings indicate that in Türkiye, the current account deficit has a greater impact on CDS spreads compared to the components of CDS spreads.

Relationship between External Domestic Debt and Economic Growth

Purpose: Pakistan is surrounded by serious socio-economic problems. Due to the low tax base and double deficit, Pakistan has to rely on internal and external capital flows. Foreign capital flows are not easily accessible, but domestic capital flows are always accessible Methodology: The study investigates the effects of domestic debt on economic growth in Pakistan by applying the OLS technique Findings: The study indicates that the stock of domestic debt positively affects economic growth in Pakistan. This clearly means that the resources generated through internal debt have been partially used to finance public spending which contributes to economic growth. The study also notes that there is an inverse relationship between domestic debt service and economic growth. This result is due to the fact that the enormous burden of non-development spending hinders economic growth. The study results reveal that the negative effects of domestic debt service on economic growth is stronger than the positive effects of domestic debt on economic growth. Unique Contribution to Theory, Policy and Practice: The study also suggests some policies to repay existing internal debt.

Panel Data Analysis of the Impact of External Debt on Economic Growth and Inflation: The Case of Emerging Market Economies

This study aimed to analyze the impact of external debt on economic growth and inflation for emerging market economies for the period 1995-2020 using the panel data method. To this end, the study used the data on 12 countries listed in the Morgan Stanley Capital Index (MSCI) Emerging Markets Index. The results of the panel cointegration analysis showed that changes in external debt stock affect economic growth in the opposite direction and inflation rate in the same direction. According to the country-specific results of the panel cointegration analysis, external debt had a negative impact on economic growth in all countries except Mexico, Egypt, India, and Türkiye. External debt increased inflation in all countries except China, Egypt, India, South Africa, and Thailand. The Bootstrap panel causality test results showed a unidirectional causality from economic growth to external debt stock in China, India and Thailand, and a bidirectional causality in China. A unidirectional causality was also found from external debt stock to inflation in Colombia, and a unidirectional causality from inflation to external debt in China, India, Peru, and Thailand. Based on the cointegration analysis results, it is recommended that external debt should be used to finance more productive investments in order to ensure sustainable economic growth in Brazil, China, Colombia, Indonesia, Peru, Philippines, South Africa, and Thailand. The panel causality test results also showed that economic growth in China, India, and Thailand requires more external resources. Based on these results, it is recommended to reduce external debt in order to reduce inflation in Brazil, Colombia, Indonesia, Mexico, Peru, Philippines, and Türkiye.

The Analysis and Countermeasures of US Dollar Exchange Rate on China\'s Import and Export Trade

This paper investigates the intricate relationship between the Chinese exchange rate and the US dollar, particularly amidst a low-growth economic environment and the potential impact on trade dynamics. Set against the backdrop of the 2008 financial crisis, concerns have arisen over China's substantial dollar-denominated debt stock and the possibility of a sell-off that could devalue the US dollar and impact the global economy. As the post-Covid recession is expected to weaken the US dollar, this study aims to explore potential US countermeasures to maintain the currency's strength. The analysis suggests that China should transition from an export-led development strategy to a more domestically focused approach, promoting industrial modernization, implementing strategic economic adjustments, and enhancing the management and regulation of foreign exchange reserves. Active participation in East Asian monetary cooperation and the establishment of a regional monetary system in East Asia are also recommended. The paper highlights the influence of the US dollar exchange rate on China's import and export trade, illustrating how fluctuations in the exchange rate impact trade volumes and different sectors. To mitigate these effects, China should concentrate on developing advanced industries, modernizing traditional sectors, accelerating new urbanization, and stimulating domestic consumption. Additionally, the government should optimize the external trade services system by reducing burdens on enterprises, deepening tariff facilitation reforms, and supporting small and medium-sized enterprises. In conclusion, comprehending the complex relationship between the Chinese exchange rate and the US dollar is crucial for maintaining global trade stability. Implementing the recommended countermeasures can assist both countries in overcoming economic challenges and fostering mutually beneficial trade relations. By carefully navigating the dynamics between these two currencies, governments can strengthen their economies and contribute to a more stable and prosperous global trade environment.

Macroeconomic policy at the end of the age of abundance

Progressive policy proposals influenced by post-Keynesian economics emphasise the use of fiscal policy and income redistribution to maintain aggregate demand at levels which achieve full employment. Given persistent evidence of weak demand, excess capacity and unemployment in rich economies since around 1980, expansion of demand would have been appropriate over much of this period. Tighter supply constraints – both short-run constraints due to disruption caused by climate change and geopolitical tensions, and longer-run constraints due to absolute carbon budgets – impose additional challenges in designing policy. In order to increase investment sufficiently to achieve net zero goals, constraints on consumption may be required. Such constraints would weaken the multiplier mechanisms emphasised by post-Keynesian analysis, implying lower growth and higher public debt stocks. Traditional progressive policy proposals will need updating to reflect these constraints. New institutional arrangements will be required to implement updated policy packages.

Evaluation of Foreign Direct Investment (FDI) and Public-Private Partnerships Involving Chinese Investment in Nigeria.

This research work evaluated the Foreign Direct Investment (FDI) and Public-Private Partnerships (PPP) schemes involving Chinese Investment in FCT Projects, Research objective which guided this work was to compare Chinese investments and PPP schemes as methods for infrastructure finance in FCT. Research questions were formulated and tested. To carry out the work, comparative analysis of both investment options was done using the Google Research tool, interviews and an extensive literature review to evaluate the use of Chinese Investment and Public-Private Partnership (PPPs) in FCT Projects to find out which option met Sustainability Development Goals (SDG 11) criteria. Findings from the work show that Infrastructure projects are massive, and complex with multiple stakeholders. The research also found out that Chinese investment has increased Nigerian debt stock and that infrastructure paucity leads to multiple challenges in Nigeria. The T-test result was less than 0.05, null hypothesis was upheld and it affirmed PPP as a preferred method of financing infrastructure in Nigeria and recommended for the use of PPPs as the most costeffective method of infrastructure financing in Nigeria in order to meet up with SDG 11. Keywords: Foreign, Direct Investment, Public, Private Partnerships, Chinese and Investment

National debt management and business sustainability in Africa's largest economy: A focus on the private sector.

In many developing economies, high and increasing public debt profile constitutes an essential means of financial risk. An appropriate debt management is germane for survival of business and good international reputation though its effect on private sector credit mobilization had been seldomly investigated. This study seeks to know whether strategic debt management approach exacts a significant effect on the Nigerian private sector and Africa at large resulting to higher credit availability for sustainable enterprise establishment. The study used a time-series observation spanning from 1981-2021. The method of data analysis employed the unit root test for stationarity. Johansen cointegration and vector error correction approach. The result of the unit root test indicates the series were all stationary after first difference and thus were integrated of order1. The Johansen cointegration test support the existence of a cointegrating series between the private credit and its determinants. More empirical evidence from the study shows that proper debt management and increase revenue generation through net taxes on products accounted for 0.93 and 1.32% increase in private sector credit mobilization, while total external debt stock was responsible for a significant negative influence of 0.60% on private sector credit mobilization. The study recommends that the government should always be proactive in their strategic and innovative approach to debt management, revenue generation and sources of funds. This will help not only to avoid crowding out of the private sector but will enhance adequate credit mobilization for effective operations of the private sector.

Determinants of Military Spending in Africa: Do Institutions Matter?

Abstract This paper focuses on the determinants of military spending in Africa by considering the role played by institutions. With data obtained between the years 1996–2019, the Driscoll and Kraay fixed effects, the Generalised Method of Moments (GMM), and the Bayesian Model Averaging (BMA) estimators are used. The findings suggest that government size, trade freedom, economic risk, and political risk decrease military spending, whereas government stability and military involvement in politics are found to raise it. Using alternative institutional variables, we find that corruption, government effectiveness, political stability, regulatory quality, the rule of law, and voice and accountability significantly diminish military spending in Africa. In addition, concerning the economic determinants, the results reveal that trade openness and total natural resource rents reduce military spending, while GDP per capita, inflation, and foreign debt stocks increase it. Looking at strategic determinants, arms imports, urban population, and ethnic tensions positively affect African military expenditures. Robustness checks show that these results change once regional specificities are considered. The study concludes that institutional factors could be an engine for evolution in Africa’s military spending.

Austerity urbanism, local government debt-drive, and post COVID predicaments in Britain

Abstract Conditions of local governance in the aftermath of the global financial crisis are often discussed as reflections of ‘austerity urbanism’. What forms of mutations have taken place in austerity urbanism after the initial years of spending cuts at the local level? This article investigates this question by focusing on the uneven geographies of post-austerity debt-drive in Britain. It is shown that austerity urbanism in Britain was somewhat peculiarly combined with debt-driven ‘entrepreneurialism’ several years after the introduction of extensive budgetary cuts. The local debt-drive was instigated by austerity-urbanism as a way of resolving the challenge of financing local services and development. The relatively low level of initial debt stock among local governments, very attractive borrowing terms and various regulatory changes facilitated the expansion of borrowing. Using debt stock data for over 300 local governments, it is demonstrated how debt build-up evolved to create financial difficulties for around 40 per cent of local governments. The Covid-19 pandemic, with its severe impacts on local revenues, exposed the debt-driven local development projects, leading to rescue operations and efforts to curb borrowing through new rules and regulations. For deeper international insights into the dynamics of debt-financing and urban development in times of crises, further research is needed to complement existing research in Britain and the USA, where relatively greater evidence exists.