Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 6

external debt Related Abstracts

6 Predicting Indonesia External Debt Crisis: An Artificial Neural Network Approach

Authors: Riznaldi Akbar

Abstract:

In this study, we compared the performance of the Artificial Neural Network (ANN) model with back-propagation algorithm in correctly predicting in-sample and out-of-sample external debt crisis in Indonesia. We found that exchange rate, foreign reserves, and exports are the major determinants to experiencing external debt crisis. The ANN in-sample performance provides relatively superior results. The ANN model is able to classify correctly crisis of 89.12 per cent with reasonably low false alarms of 7.01 per cent. In out-of-sample, the prediction performance fairly deteriorates compared to their in-sample performances. It could be explained as the ANN model tends to over-fit the data in the in-sample, but it could not fit the out-of-sample very well. The 10-fold cross-validation has been used to improve the out-of-sample prediction accuracy. The results also offer policy implications. The out-of-sample performance could be very sensitive to the size of the samples, as it could yield a higher total misclassification error and lower prediction accuracy. The ANN model could be used to identify past crisis episodes with some accuracy, but predicting crisis outside the estimation sample is much more challenging because of the presence of uncertainty.

Keywords: Artificial Neural Network, ANN, debt crisis, external debt

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5 The External Debt in the Context of Economic Growth: The Sample of Turkey

Authors: Ayşen Edirneligil, Mehmet Mucuk

Abstract:

In developing countries, one of the most important restrictions about the economic growth is the lack of national savings which are supposed to finance the investments. In order to overcome this restriction and achieve the higher rate of economic growth by increasing the level of output, countries choose the external borrowing. However, there is a dispute in the literature over the correlation between external debt and economic growth. The aim of this study is to examine the effects of external debt on Turkish economic growth by using VAR analysis with the quarterly data over the period of 2002:01-2014:04. In this respect, Johansen Cointegration Test, Impulse- Response Function and Variance Decomposition Tests will be used for analyses. Empirical findings show that there is no cointegration in the long run.

Keywords: Economic growth, Time Series Analysis, external debt, Turkish economy

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4 Debt Relief for Emerging Economies: An Empirical Investigation

Authors: Hummad Ch. Umar

Abstract:

Most of the developing economies, including Pakistan, are confronted with high level of external debt which is adversely affecting their economic performance. The hypothesis of debt overhang is often used to assess the negative relationship between foreign debt and the economic growth of the indebted country. As first objective of the present study, this hypothesis is tested by using Pooled OLS (POLS), Generalized Method of Moment (GMM), Random Effect (RE), and Fixed effect (FE) techniques. As second objective, the study uses the concept of debt Laffer Curve to determine the eligibility condition of the indebted countries for the relief programs. According to this approach, countries lying on the right side of the Laffer Curve are stated to be trapped in the strong debt overhang making them unable to come out of the vicious circle of low growth and high foreign debt. The empirical analysis confirms that only two countries out of twenty two completely fulfill the conditions of being eligible for the debt relief. All other countries continue to face debt burden of different magnitudes. The study further confirms that the debt relief alone is not sufficient for overcoming the debt problem. Instead, sound economic policies and conducive investment decisions are required to lay the foundations of long-term growth and development. Debt relief should be the option for only those countries that meet a minimum measurable criterion of good governance, economic freedom, and consistency of policies.

Keywords: investment decisions, external debt, debt burden, debt overhang, debt laffer curve, debt relief

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3 Usage of Military Spending, Debt Servicing and Growth for Dealing with Emergency Plan of Indian External Debt

Authors: Sahbi Farhani

Abstract:

This study investigates the relationship between external debt and military spending in case of India over the period of 1970–2012. In doing so, we have applied the structural break unit root tests to examine stationarity properties of the variables. The Auto-Regressive Distributed Lag (ARDL) bounds testing approach is used to test whether cointegration exists in presence of structural breaks stemming in the series. Our results indicate the cointegration among external debt, military spending, debt servicing, and economic growth. Moreover, military spending and debt servicing add in external debt. Economic growth helps in lowering external debt. The Vector Error Correction Model (VECM) analysis and Granger causality test reveal that military spending and economic growth cause external debt. The feedback effect also exists between external debt and debt servicing in case of India.

Keywords: India, external debt, military spending, ARDL approach

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2 The Effect of Public Debt on the Economic Growth and Development in Nigeria

Authors: Uzoma Emmanuel Igboji

Abstract:

This paper examines the influence of public debts (external and internal) on economic growth and development in Nigeria from (1980-2015). The study uses aggregate GDP as a proxy for economic growth, per capital income as a proxy for standard of living and Government expenditure on health as a proxy for human capital development, while Foreign Direct Investment, Unemployment rate, and Oil revenue were used as control variables. The study made use of ex-post facto research design with the data extracted from the Central Bank of Nigeria (CBN) Statistical Bulletin and the World Bank database. It adopted a multiple regression analysis of the ordinary least square (OLS) method with the help of E-View version 3.0. The results revealed that external debt has a negative and insignificant effect on GDP, per capital income and human capital development. The study concluded that external debts were being channeled to meet the recurrent expenditures of the nation’s economy at the expense of productive investment that could stimulate growth and poverty alleviation. It, however, recommended that government should ensure that the bulk of the total borrowings are mostly sourced from within the domestic economy so that the repayment of the principal and interest will serve as a crowd in-effect rather that crowd out-effect which in turn further accelerates the country’s economic growth and development.

Keywords: Economic growth, Nigeria, external debt, internal debt

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1 Political Regimes, Political Stability and Debt Dependence in African Countries of Franc Zone: A Logistic Modeling

Authors: Nounamo Nguedie Yann Harold

Abstract:

The factors behind the debt have been the subject of several studies in the literature. Pioneering studies based on the 'double deficit' approach linked indebtedness to the imbalance between savings and investment, the budget deficit and the current account deficit. Most studies on identifying factors that may stimulate or reduce the level of external public debt agree that the following variables are important explanatory variables in leveraging debt: the budget deficit, trade opening, current account and exchange rate, import, export, interest rate, term variation exchange rate, economic growth rate and debt service, capital flight, and over-indebtedness. Few studies addressed the impact of political factors on the level of external debt. In general, however, the IMF's stabilization programs in developing countries following the debt crisis have resulted in economic recession and the advent of political crises that have resulted in changes in governments. In this sense, political institutions are recognised as factors of accumulation of external debt in most developing countries. This paper assesses the role of political factors on the external debt level of African countries in the Franc Zone over the period 1985-2016. Data used come from World Bank and ICRG. Using a logit in panel, the results show that the more a country is politically stable, the lower the external debt compared to the gross domestic product. Political stability multiplies 1.18% the chances of being in the sustainable debt zone. For example, countries with good political institutions experience less severe external debt burdens than countries with bad political institutions.

Keywords: political factors, African countries, external debt, Franc Zone

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