scholarly journals Macroeconomic determinants of external debt in Nepal: The ARDL Approach

2020 ◽  
Vol 2 (2) ◽  
pp. 275-289
Author(s):  
Tilak Singh Mahara ◽  
Sabina Dhakal
Keyword(s):  
Foreign Aid ◽  
Budget Deficit ◽  
Trade Openness ◽  
External Debt ◽  
Debt Burden ◽  
Debt Accumulation ◽  
Long Run ◽  
Short Run ◽  
Macroeconomic Determinants

Background: External debt is the loan amount borrowed from the international level, payable with interest and principal. It is the major source of financing budget deficit in a developing country. Debt accumulation for productive investment is a viable strategy for long-term development. To escape the external debt burden or for the external debt burden strategy, it is crucial to study the major macroeconomic determinants of external debt. Objective: The principal objective of this study is to examine the major macroeconomic determinants of external debt in Nepal. Methods: In this study, the external loan is taken as a dependent variable whereas, budget deficit, per capita gross domestic product, terms of trade, trade openness, foreign aid, and real effective exchange rates are taken as explanatory variables that may cause external borrowing in Nepal. The study applies the ARDL cointegration approach to trace out the relationship between the stated variables. The bound test (F-Version) has been applied for the determination of the existence of long-term cointegration among variables.Short-run dynamics is measured by the Error Correction Mechanism. Results: The empirical result indicates that fiscal deficit, trade openness, and foreign aid are major macroeconomic determinants of external debt in Nepal. From the obtained results, it is seen that an increase in foreign aid helps to significantly reduce external debt but trade openness and the budget deficit significantly leads to an increase in external debt both in the short-run as well as in the long-run. The error correction term is found to be significant and negative, showing proof of a strong association between the selected variable and ensures the correction of short-term disequilibrium to a stable equilibrium at the rate of 37 percent per annum. Conclusions: The study concludes that foreign aid, budget deficit, and trade openness are the main determinants of external debt in Nepal in both the long-run and short-run.  Appropriate export-import or foreign trade policy, effective demand management policy, progressive tax system as well as monitoring tax evasion, effectual and productive utilization of available resources helps to reduce debt accumulation and saves the nation from the possible debt trap.

scholarly journals Macroeconomic Determinants of External Debt Accumulation in Ethiopia: An ARDL Bound Testing Approach

2021 ◽  
Vol 4 (2) ◽  
pp. 1-28
Author(s):  
Eyayu Tesfaye Mulugeta
Keyword(s):  
External Debt ◽  
Infrastructure Development ◽  
Continuous Increase ◽  
Debt Accumulation ◽  
Long Run ◽  
Short Run ◽  
Testing Approach ◽  
The Government ◽  
Macroeconomic Determinants ◽  
External Borrowing

This study attempts to explore the major macroeconomic determinants of external debt stock growth in Ethiopia prompted by a continuous increase in government external borrowing over the period 1981-2018. For this purpose, the study employed the ARDL bound testing approach and all the necessary time series diagnostic tests were conducted. The long run model estimation result revealed that per capita GDP growth has a positive and significant effect on the country’s external debt stock. The result also revealed that the budget deficit and political instability put a significant upward pressure on the external debt stock growth of the country both in the short run and long run. Consistent with some existing empirical evidence, the study revealed negative and significant influence of openness and infrastructure development on the external debt stock growth. Consequently, the government should embark on prudent borrowing to achieve structural transformation.

Modelling the Nexus Between Foreign Aid and Economic Growth: A Case of Afghanistan and Egypt

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Muhammed Ashiq Villanthenkodath ◽  
Ubaid Mushtaq
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Time Series Data ◽  
Trade Openness ◽  
Political Stability ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
Annual Time Series ◽  
And Control

This paper tries to explore the existence of a long-run relationship between foreign aid and economic growth by using the data from the two highest foreign aid recipient countries. Using the annual time series data from 1965 to 2017 this study uses several econometric models such as Johansen and Juselius cointegration, Granger causality and vector auto regression to establish the long and short-run relationships among foreign aid inflows and economic growth while also considering financial development and trade openness from both the countries. The empirical results suggest that no long-run relationship exists among foreign aid inflows and economic growth for both the countries. However, unidirectional causality running from foreign aid to economic growth is indicative in both countries. Therefore, the findings in this paper support the adequate need for foreign aid for effective economic growth amid an upright policy environment, related issues of conditionality and political stability. Our results are robust to independent, and control variables and estimation techniques are also on par with robustness.

scholarly journals Sources of Economic Growth in Zambia: An Empirical Investigation

2017 ◽  
Vol 18 (2) ◽  
pp. 275-290 ◽  
Author(s):  
Themba G. Chirwa ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
International Trade ◽  
Foreign Aid ◽  
Development Aid ◽  
Human Capital Development ◽  
Long Run ◽  
Short Run ◽  
Capital Development ◽  
Macroeconomic Determinants

In this article, the key macroeconomic determinants of economic growth in Zambia are investigated using the autoregressive distributed lag (ARDL) bounds testing approach. The study has been motivated by the unsustainable growth trends that Zambia has been experiencing in recent years. Our study finds that the key macroeconomic determinants that are significantly associated with economic growth in Zambia include, amongst others, investment, human capital development, government consumption, international trade and foreign aid. The study’s results reveal that in the short run, investment and human capital development are positively associated with economic growth, while government consumption, international trade and foreign aid are negatively associated with economic growth. However, in the long run, the study finds investment and human capital development to be positively associated with economic growth, while only foreign aid is negatively associated with economic growth. These results have significant policy implications. They imply that short–run economic policies should focus on creating incentives that attract investment and increase the quality of education, the effectiveness of government institutions, the promotion of international trade reforms and the effectiveness of development aid. In the long run, development strategies should focus on attracting the accumulation of long-term investment, improving the quality of education and the effectiveness of development aid.

scholarly journals Determinants of Economic Growth: An Empirical Evaluation of the Ugandan Economy

2021 ◽  
Author(s):  
Richard Sendi ◽  
John Bbale Mayanja ◽  
Enock Nyorekwa
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Population Growth ◽  
Foreign Aid ◽  
Trade Openness ◽  
Gdp Growth ◽  
Government Consumption ◽  
Long Run ◽  
Short Run ◽  
Determinants Of Economic Growth

This paper investigated the determinants of economic growth in Uganda for the period 1982–2015 using the autoregressive distributed lag (ARDL) mode. The paper was motivated by the impressive economic performance of Uganda since 1986 that made her graduate from a “failed state” to a “mature reformer” in a short time. The paper established that while the initial level of GDP growth, government consumption and investment positively affected Uganda’s economic growth in the short run, inflation, foreign aid and a policy dummy variable representing structural adjustment programmes negatively impacted GDP growth. The results revealed that in the long run, trade openness, population growth, government consumption and investment positively influenced GDP growth in Uganda. The results failed to show a significant relationship between trade openness, population growth and human capital accumulation and economic growth in the short run. The study also failed to show a significant relationship between inflation, human capital and foreign aid and economic growth in the long run. The paper recommends policies that enhances sound macroeconomic fundamentals such as price stability, investment promotion, trade openness, increased government consumption, increased population growth and effective foreign aid.

Impact of Selected Macroeconomic Determinants on Economic Growth in India: An Empirical Study

2018 ◽  
Vol 22 (4) ◽  
pp. 405-415 ◽  
Author(s):  
Rajesh Sharma ◽  
Pradeep Kautish ◽  
D. Suresh Kumar
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Exchange Rate ◽  
Foreign Aid ◽  
Consumption Expenditure ◽  
Human Capital Development ◽  
Long Run ◽  
Short Run ◽  
Capital Development ◽  
Macroeconomic Determinants

Due to the socio-economic, infrastructural and governance peculiarities, identification of key macroeconomic factors determining the economic growth in developing countries becomes a complicated case. The present study attempts to assess the impact of foreign aid, government consumption expenditure, foreign direct investment, trade openness, exchange rate, human capital development, and inflation on economic growth in India by using yearly data for the period of 46 years, that is, from 1971 to 2016. An autoregressive distributed lag (ARDL) bounds model enables to examine the short-run and long-run impact of selected determinants on economic growth during the study period. The outcomes of the study find that in the long run, foreign aid, the government’s final consumption expenditure and foreign direct investment have a positive and significant impact on economic growth, whereas, economic growth has been negatively influenced by exchange rate and human capital development. Contrary to the long run, foreign aid has a negative and significant impact on economic growth in the short run. The short-run outcomes show that all the selected macroeconomic determinants have either negative or positive influence on economic growth. To ensure the long-run economic growth, besides regulating the exchange rate fluctuations, policies related to export -import and human capital development need to be re-examined.

scholarly journals Fiscal Impact of Foreign Aid in Morocco: A Multivariate Cointegration Analysis

2018 ◽  
Vol 4 (4) ◽  
pp. 378
Author(s):  
Kawthar Aghoutane ◽  
Mohamed Karim
Keyword(s):  
Foreign Aid ◽  
Cointegration Analysis ◽  
Tax Revenue ◽  
Fiscal Impact ◽  
Correction Model ◽  
Model Following ◽  
Long Run ◽  
Short Run ◽  
The Relationship

<p><em>The aim of this study is to evaluate the relationship between foreign aid and taxe revenue in Morocco by using the Error Correction Model Following the approach of Johansen to jointly capture the long-run relationship and short-run dynamics between aid and tax revenue. Other variables such as the shares of agriculture and industry in GDP, exports, imports and GDP are also included in the model. The results indicate that </em><em>the direct effect of foreign aid on tax revenue is insignificant in the short term</em><em>, but it becomes negative and significant in the long term.</em></p>

scholarly journals Determinants of the Size of the Government Expenditure: An Empirical Study on Bangladesh

2018 ◽  
Vol 10 (11) ◽  
pp. 149
Author(s):  
Mahamuda Firoj ◽  
Nair Sultana ◽  
Farhana Sultana
Keyword(s):  
Foreign Aid ◽  
Dynamic Equation ◽  
Government Expenditure ◽  
External Debt ◽  
Least Square ◽  
Size Of Government ◽  
Long Run ◽  
Short Run ◽  
Static Equation ◽  
The Government

Analysis of the nature of government expenditure constitutes a central concern in economic literature. This is because many countries of the world consistently have increased the size of government expenditure. Bangladesh has done the same practice over the last few decades. There is a need to investigate the factors which determine the size of the public spending of Bangladesh. The error correction modeling technique for the short-run dynamic equation and ordinary least square (OLS) for long-run static equation are used over the period 1973 to 2016 to this purpose.&nbsp; The results of the short run dynamic equation and long-run static equation showed that external debt, real GDP, urbanization, tax, and non-tax government revenue positively influence the government expenditure where dependency on foreign aid and trade openness adversely affect it. The study recommends that the government should take proper step to expand the revenue base, stimulate the economic growth and reduce the external debt, and foreign aid.

scholarly journals Is External Debt Hampering Growth in the ECOWAS Region?

2020 ◽  
Vol 12 (4) ◽  
pp. 54
Author(s):  
Felix Fofana N’Zue
Keyword(s):  
Economic Performance ◽  
Positive Impact ◽  
External Debt ◽  
Debt Accumulation ◽  
Knowing That ◽  
Long Run ◽  
Rate Of Increase ◽  
Short Run ◽  
Regional Economic Performance ◽  
The Impact

The paper aims to determine the impact of external debt on economic growth in the ECOWAS region. Panel data spanning from 1990 to 2016 is used and analyzed using panel CS-ARDL estimation approach. The results indicate cointegration among the variables. The paper found that external debt has a positive impact on economic performance up to a threshold. In the short run, the threshold stood at 45% and in the long run, it stood at 42.52%. Beyond these points, additional external debt accumulation negatively affects the regional economic performance. Knowing that the level of the region&rsquo;s external debt-to-GDP ratio stood at 33.11% in 2018 (below the threshold), it appears that external debt has not yet hampered economic performance in the ECOWAS region. However, there is a need for caution given the fast rate of increase (25% in six years) of external debt accumulation in the region.

scholarly journals The Impact of Foreign Aid on Economic Growth in Morocco: Econometric Analysis Using VECM

2017 ◽  
Vol 9 (5) ◽  
pp. 87 ◽  
Author(s):  
Kawthar Aghoutane ◽  
Mohamed Karim
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Empirical Literature ◽  
Government Consumption ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Impact

The present work aims to contribute to the empirical literature on the effectiveness of Foreign aid in Morocco. We use the Vector Error Correction Model (VECM) to jointly capture the long-run relationship and short-run dynamics between Official Development Assistance and economic growth. Other variables such as investment, exports, and government consumption are also included in the model. The results indicate that the foreign aid promotes growth through government consumption in the short term. However, the impact of aid on economic growth becomes negative in the long term.

Modelling the Nexus Between Foreign Aid and Economic Growth: A Case of Afghanistan and Egypt

2021 ◽  
Vol 39 (1) ◽  
Author(s):  
Muhammed Ashiq Villanthenkodath ◽  
Ubaid Mushtaq
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Time Series Data ◽  
Trade Openness ◽  
Political Stability ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
Annual Time Series ◽  
And Control

This paper tries to explore the existence of a long-run relationship between foreign aid and economic growth by using the data from the two highest foreign aid recipient countries. Using the annual time series data from 1965 to 2017 this study uses several econometric models such as Johansen and Juselius cointegration, Granger causality and vector auto regression to establish the long and short-run relationships among foreign aid inflows and economic growth while also considering financial development and trade openness from both the countries. The empirical results suggest that no long-run relationship exists among foreign aid inflows and economic growth for both the countries. However, unidirectional causality running from foreign aid to economic growth is indicative in both countries. Therefore, the findings in this paper support the adequate need for foreign aid for effective economic growth amid an upright policy environment, related issues of conditionality and political stability. Our results are robust to independent, and control variables and estimation techniques are also on par with robustness.

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