THE PROBLEM OF EXTERNAL DEBT AND CURRENT ACCOUNT DEFICIT IN DEVELOPING COUNTRIES: THE CASE OF TURKEY

2017 ◽  
Vol 0 (14) ◽  
pp. 0-0
Author(s):  
Oğuz BAL
Keyword(s):  
Developing Countries ◽  
Current Account ◽  
Current Account Deficit ◽  
External Debt

The Effects of Macroprudential Policies on Financial Stability in Developing Countries

2019 ◽  
pp. 92-114
Author(s):  
Sümeyra Gazel
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Current Account ◽  
Financial Stability ◽  
Current Account Deficit ◽  
Common Factor ◽  
Policy Instruments ◽  
Credit Growth ◽  
Macroprudential Policies ◽  
The Current Account

In this chapter, the concept of financial instability is examined in terms of the policy instruments used by central banks. Although the policy instruments used in each country differ according to the country conditions, it is thought that the common factor among developing countries with a current account deficit problem is exchange rate volatility resulting from excessive credit growth and short-term capital movements. In this context, Argentina, Brazil, Chile, Colombia, Hungary, Indonesia, India, Mexico, Poland, South Africa, and Turkey are examined with regard to the effects of macroprudential policies on financial stability for the period between Q2 of 2006 and Q2 of 2017 by using the time-varying panel causality test developed by Dumitrescu and Hurlin. The results of the analysis indicate that excessive credit growth is a cause of the current account deficit. The same findings are also valid for interest rate. There is no obvious link between the exchange rate and the current account deficit.

scholarly journals Inflation targeting, disinflation, and debt traps in Argentina

2020 ◽  
Vol 17 (1) ◽  
pp. 78-105
Author(s):  
Emiliano Libman ◽  
Gabriel Palazzo
Keyword(s):  
Foreign Exchange ◽  
Current Account ◽  
Risk Premium ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Current Account Deficit ◽  
External Debt ◽  
Stabilization Process ◽  
Eventual Collapse

This paper highlights the role of external indebtedness and the presence of inflationary inertia in order to assess the effectiveness and sustainability of inflation targeting during disinflation episodes. As the recent Argentinian experience illustrates, a sluggish inflation rate and a significant current-account deficit may make the stabilization process difficult. To illustrate the point, we build a model that shows that, when inflation adjusts fast, the target may be achieved without building too much external debt. But if inflation adjusts slowly, an excessive build-up of external debt could lead to an increase in the risk premium, a sudden shortage of foreign exchange, and the eventual collapse of the inflation-targeting regime.

The Impact of Current Account Deficit on Economic Growth: An ARDL Approach

2020 ◽  
Vol 21 (1) ◽  
pp. 76-92
Author(s):  
Tamma Reddy ◽  
T. Sita Ramaiah
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Current Account ◽  
Unit Root ◽  
Current Account Deficit ◽  
External Debt ◽  
Unit Root Test ◽  
Output Growth ◽  
The Impact ◽  
The Current Account

In this study, we examine the linkages between External debt, Exchange rate, Current account deficit, and GDP at Factor cost for India over the period of 1975-76 to 2018- 19 using the Unit root test and Autoregressive Distributed Lag (ARDL). The results of the unit root test reveal that GDP growth rate and External debt are integrated at the level I(0); while the Current Account deficit and Exchange rate are integrated at first order I(1). The results of the ARDL technique reveal that the current account deficit has a positive and significant impact on Real GDP. It clearly reflects the role of imports in accelerating the growth of a developing economy like India. There is also evidence that the external debt has a positive and significant impact on the Current account deficit while the Exchange rate does not have an impact on the Current account deficit. The authors opine that the external debt assists in a gradual reduction in the current account deficit and contributes to economic growth by narrowing down the saving-investment gap. As the demand for Indian exports is inelastic in the global market, the country has not benefitted from the depreciation of its currency. The authors stressed the need for focusing on further diversification of its export markets, creating a conducive environment for attracting longer-term FDIs, liberalization, promoting commercial services exports, and achieving exchange rate stability in the context of the USA-China trade war and stagnation in the world output growth. Huge untapped potential for IT-enabled services should be exploited to promote service trade. The authors point out the current account deficit in the range of 2-3 percent of GDP can be manageable.

scholarly journals Public Debt, Current Account Deficit and Economic Growth: A Study on Indian Context

2020 ◽  
Vol 9 (3) ◽  
pp. 594-601
Keyword(s):  
Economic Growth ◽  
Current Account ◽  
Public Debt ◽  
Current Account Deficit ◽  
External Debt ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Internal Debt

External debt and internal debt form main components of the public debt structure in India. India’s debt profile shows increasing external debt and simultaneously increasing the deficit in current account which have impact on economic growth of India. Our study assesses the impact of India’s Gross External Debt (GED), Internal Debt (IND) and Current Account Deficit (CAD) on economic growth (GDP) by using time series data from 1998-99 to 2018-19. We intend to find long-run as well as short run relationship between the variables with the help of Eviews software. Stationarity of data is tested by considering Augmented Dickey-Fuller (ADF) test statistics and used Johansen Co-integration test and Vector Error Correction Model (VECM). The result shows co-integration among the variables with one equation. The result of VECM shows existence of long-run relationship among the variables. But the study fails to find the short-run causality among the variables. The results show external debt (GED), internal debt (IND), and Current Account Deficit (CAD) have negative and statistically insignificant relationship with GDP. It shows increase in public debt and deficit in current account results in decrease in GDP growth.

scholarly journals Macroeconomic Policy Dilemma in an Open Economy

2013 ◽  
pp. 120-126
Author(s):  
A. V. Kholopov
Keyword(s):  
Policy Implementation ◽  
Current Account ◽  
Open Economy ◽  
Current Account Deficit ◽  
External Debt ◽  
Macroeconomic Policy

The article analyses the problems of macroeconomic policy implementation in an open economy with substantial external debt and current account deficit.

scholarly journals External Debt Accumulation and Its Impact on Economic Growth in Pakistan

2012 ◽  
Vol 51 (4II) ◽  
pp. 79-96 ◽  
Author(s):  
Rifaqat Ali ◽  
Usman Mustafa
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
World Bank ◽  
Foreign Currency ◽  
Current Account Deficit ◽  
External Debt ◽  
Development Project ◽  
Debt Accumulation ◽  
Foreign Governments ◽  
The Given

The accumulation of external debt is common phenomenon of the developing countries and it has become a common feature of the fiscal sectors of most of the economies. A country with lower saving rate needs to borrow more to finance the given rate of economic growth. So external debt is obtained to sustain the growth rate of the economy, which is otherwise not feasible with the given domestic resources. Pakistan is one of the developing countries and faces serious debt problems, according to World Bank Report 2000-2001, Pakistan is among the Highly Indebted Countries (HICs); because Pakistan’s present and future debt situation is very grim. According to the World Bank total external debt may be defined as debt owed to non-resident repayable in terms of foreign currency, goods or services. External debt is the composition of long term debt (public and publicly guaranteed debt plus private non guaranteed debt), short term commercial debt and International Monetary Fund (IMF) loans. Prior to early 1970s the external debt of developing countries was primarily small and official phenomenon, the majority of creditors being foreign governments and international financial institutions offer loan for development project [Todaro (1988)]. At the same time current account deficit was common which increased the external indebtedness of the developing countries, until when Mexico, despite an oil exporter, declared in august, 1992 that it could not services its debt ever since, the issue of external debt and its servicing has assumed critical importance and introduced the debt crises debate [Were (2001)].

scholarly journals Export-Led Growth Model and External Debt in Turkey

2017 ◽  
Author(s):  
İlkay Noyan Yalman ◽  
Özcan Işık ◽  
Şerife Merve Koşaroğlu
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Foreign Trade ◽  
Growth Model ◽  
Current Account ◽  
Current Account Deficit ◽  
External Debt ◽  
Time Series Model ◽  
Causality Analysis ◽  
Turkish Economy

After the 1980s, as the globalization movement accelerated, countries increased their foreign trade transactions. In with this process, import-based growth model was abandoned in the Turkish economy and an export-based growth model is adopted. The export-led growth model increased export revenues started to, growth has gained speed, however, due to fact that the industry is dependent on imported inputs, started to increase external balance and current account deficit problems. In addition, there have economic growth that is not create employment due to insufficient savings and investments. For this reason, the increase in external debt tended to increase further. Such causes have led to an increase in external debt. In this study, the effect of export-led growth on foreign debts will be analyzed. For this purpose, foreign debts and growth relation in Turkey will be analyzed with time series model and will be done causality analysis.

Fiscal questions cloud Costa Rica’s economic outlook

2018 ◽  
Keyword(s):  
Current Account ◽  
Current Account Deficit ◽  
External Debt ◽  
The State ◽  
Medium Term ◽  
Fiscal Reform ◽  
Content Type ◽  
Domestic Debt ◽  
Key Sectors ◽  
Economic Outlook

Significance Such unity proved elusive for former President Luis Guillermo Solis, for whom fiscal reform in particular caused legislative gridlock. Alvarado inherits an economy that is showing signs of strengthening after being relatively stagnant through much of 2017. However, the state of public finances is a source of enduring investor concern. Impacts Volatility in key sectors means growth will be unpredictable over the coming year. Relatively strong FDI means the current account deficit will not cause significant difficulties. Domestic debt will be a far more serious risk than external debt over the medium term.

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