Determinants of external debt in South Africa: a VAR-based approach

Murwirapachena, Genius; Kapingura, Forget Mingiri

doi:10.1504/ijepee.2015.069593

Cited by 12 publications

(10 citation statements)

References 11 publications

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“…There has been a rise in academic interest in foreign debt in recent years, especially in developing economies. Murwirapachena & Kapingura (2015) suggested that an increase the foreign reserves of a nation could also help decrease its foreign debt. Low and unreliable foreign exchange reserves on the economic fronts will raise several other problems.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of External Debt: The Case of Somalia

Omar¹,

Ibrahim

2021

Asian Development Policy Review

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Most emerging countries owe substantial external debt and depend on foreign aid to achieve sustainable economic development. However, this paper's key purpose is to examine the determinants of Somalia's external debt. To achieve this, the study used the autoregressive distributed lag (ARDL) model and cointegration test to establish the short-and long-run relationships during the period from 1980 to 2018. The results show that exchange rate and domestic investment have a significant and positive effect on external debt in the long run, while GDP per capita and government expenditure have a significant negative relationship with external debt; the result in the short run is consistent with the long-run result. The study recommends that the government of Somalia should also concentrate on the profitable sectors (e.g., livestock, fisheries and agriculture) with a view to improving the production and revenue base in order to minimize external debt, government expenditure and imports. Similarly, the expansion of a simpler tax base system and the removal of spending dependence on fiscal stability would boost fiscal balance. Many governments have disguised borrowing by those fiscal measures, which have expanded debt stocks. Foreign debt and aid dependence are not the best ways to ensure a healthy economy, so the Somali governments should start rethinking the allocation of foreign debt and policymakers could promote a strategy and policy to reduce high dependence on debt that has worked in the past. Contribution/Originality: This study contributes to the existing literature by investigating the determinants of external debt in Somalia.

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Section: Literature Reviewmentioning

confidence: 99%

Determinants of External Debt: The Case of Somalia

Omar¹,

Ibrahim

2021

Asian Development Policy Review

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“…They advocated for effective and efficient utilisation of external loans in viable, productive investment. Murwirapachena and Kapingura (2015) estimate a debt equation to determine the factors leading to the increase in South African external debt from 1980 to 2013. Using the VAR framework, they found that a decline in growth rate and increasing government expenditure on capital as the main factors causing external debt accumulation.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Re-visiting the Drivers for Increasing External Debt

Adamu

2019

JCIT

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This paper investigates the drives for increasing external debt in an open economy Nigeria over the period 1970 to 2017 using general to specific approach (GETS) approach (Hendry, 1995). The Johansen cointegration test confirms that variables have long run relationship. The empirical results for both long run and short run estimates indicate oil price, domestic savings and fiscal deficits play a significant role in increasing external debt in Nigeria. The study also found evidence that the dummy variables for exchange rate and debt relief also accelerate the growth of external. This finding indicates that, after the multilateral debt relief between 2005 and 2006, fresh loans are still coming to Nigeria. To this end, Nigeria should focus on investment in real sectors especially in agriculture and manufacturing to increase export performance. This would enable the country to generate adequate foreign earnings and stimulate domestic savings, and reduce reliance on oil revenue.

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“…Hence, the government is inclined to borrow more to finance its deficit budget. The result of Murwirapachena and Kapingura (2015) revealed that external debt in South Africa is mainly driven by high levels of government spending on infrastructure.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

“…They found that external debt stock accumulation in Nigeria is determined by the macroeconomic components of interest rate, national savings, exchange rate, and budget deficit both in the short and long run. Murwirapachena and Kapingura (2015) used the vector auto-regression model to analyze the determinants of the South African external debt utilizing annual data from 1980 to 2013. Empirical results revealed that external debt in South Africa is mainly due to sluggish levels of economic growth and high levels of government spending on infrastructure.…”

Section: Review Of Related Literaturementioning

confidence: 99%

“…Economic growth has also been identified by most scholars (Bittencourt, 2015;Globan & Matosec, 2016;Murwirapachena & Kapingura, 2015) as key drivers of external indebtedness in many developing countries, as a slow-growth economy puts upward pressure on debt. Similarly, a rising trend in unemployment rate increases borrowing for investment in employment-driven projects.…”

Section: Introductionmentioning

confidence: 97%

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Determinants of External Indebtedness in Heavily Indebted Poor Countries: What Macroeconomic and Socio-Economic Factors Matter?

Azolibe

2020

The American Economist

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This study specifically examined whether macroeconomic and socio-economic factors such as corruption, foreign aid, government expenditure, external reserve, population growth, economic growth, and unemployment rate matter in increasing or reducing the level of external indebtedness in heavily indebted poor countries (HIPCs). Both static panel data and panel fully modified ordinary least squares (OLS) estimation techniques were employed. Using panel data set of all the 39 HIPCs covering period of 1996 to 2018, we found out that the factors that matter in increasing their external indebtedness are high rate of corruption that leads to mismanagement of public funds, high dependency on foreign aids, increase in government expenditure, population growth, and unemployment rate. However, external reserve and gross domestic product (GDP) has a reducing effect on their external indebtedness. In terms of causal relationship, only corruption, population growth, and GDP have a causal relationship with external debt, while other variables exhibited a zero causal relationship with external debt. JEL Classifications: F34, E6, E24

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Determinants of external debt in South Africa: a VAR-based approach

Cited by 12 publications

References 11 publications

Determinants of External Debt: The Case of Somalia

Determinants of External Debt: The Case of Somalia

Re-visiting the Drivers for Increasing External Debt

Determinants of External Indebtedness in Heavily Indebted Poor Countries: What Macroeconomic and Socio-Economic Factors Matter?

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