On the Determinants of External Debt in Nigeria

Adamu, Ibrahim Mohammed; Rasiah, Rajah

doi:10.2139/ssrn.2865568

Cited by 8 publications

(11 citation statements)

References 37 publications

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“…Additionally, the debt service payment incites further demand for external borrowing, leading to a spiral of indebtedness. This result is also consistent with the work of Menbere (2004) for the savings-investment gap variable; Mbire and Atingi (1997) for the trade deficit variable; for budget deficit variable (Adamu -Rasiah 2016;Adane et al 2018;Ajayi 1991;Mbire -Atingi 1997); for debt service variable (Hajivassiliou 1987;Imimole et al 2014;Menbere 2004). However, the methodology they used has some limitations relative to our methodology.…”

Section: The Long-run Estimation Resultssupporting

confidence: 85%

“…With a few exceptions, most studies based on panel and cross-sectional data did not use the dynamic estimation techniques like panel ARDL. Similarly, only a few studies used ARDL in single-country cases (such as Abdullahi et al 2015;Adamu -Rasiah 2016;Adane et al 2018;and Brafu-Insaidoo et al 2019). Table 1 also shows that among HIPCs, only Ghana, Ethiopia, and Uganda have been studied.…”

Section: Theoretical Framework and Empirical Literaturementioning

confidence: 99%

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Macroeconomic determinants of external indebtedness of Ethiopia: ARDL approach to co-integration

Beyene

Kotosz

2020

Society and Economy

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Although Ethiopia is one of the Heavily Indebted Poor Countries (HIPC), there is a lack of empirical studies about the determinants of its external indebtedness. This paper aims to fill this gap by examining the macroeconomic determinants of the external indebtedness of Ethiopia between 1981 and 2016, using the two- and three-gap models as a theoretical framework and an autoregressive distributed lag bound testing approach. The result shows that in the long run, the savings-investment gap, trade deficit, fiscal deficit, and debt service have a positive and significant impact on external indebtedness. However, the growth rate of gross domestic product, trade openness, and inflation negatively and significantly affect the external indebtedness of the country. These results coincide with the predictions of the two- and three-gap models of the theoretical framework. The study argues that appropriate macroeconomic, social, and supply-side policies are essential to reducing the external indebtedness of Ethiopia.

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Section: The Long-run Estimation Resultssupporting

confidence: 85%

Section: Theoretical Framework and Empirical Literaturementioning

confidence: 99%

Macroeconomic determinants of external indebtedness of Ethiopia: ARDL approach to co-integration

Beyene

Kotosz

2020

Society and Economy

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“…Although FDI has a significant positive relationship with economic development in the host country, researchers have not yet reached a consensus on what determines FDI inflows. Several studies, such as Adamu & Rasiah (2017); Apaydin (2009); Asiedu (2006); Borensztein, De Gregorio, & Lee (1998); Mohamed & Sidiropoulos (2010); Rodríguez & Pallas (2008); Rogmans & Ebbers (2013) and Roy & Mandal (2012), tried to assess what determines FDI flows to a wide spectrum of economies based on the levels of development, i.e., developed and developing countries using panel, cross-sectional, and time series operations. What emerged as a key factor was economic growth, which represents market size, and according to Schneider & Frey (1985) market size represents efficient utilization of resources and economies of scale.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Good Institutions and Economic Uncertainty Matter to Foreign Direct Investment?

Bommadevara

Sakharkar

2021

Asian Economic and Financial Review

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This study investigates the effects of institutional quality, economic policy uncertainty and other key fundamental factors on foreign direct investment (FDI) inflows for a sample of 22 economies from 2000 to 2019. First, the quality of institutional infrastructure in the host country matter greatly to FDI inflows. Second, a subservient increase in the Economic Policy Uncertainty (EPU) growth rates adversely affects FDI inflows. Additionally, we found that macroeconomic fundamentals pertaining to the level of financial openness, exchange rate stability and financial development in the host country are of great importance to FDI inflows. In essence, the findings from our study suggest that the improvement of macroeconomic fundamentals in conjunction with robust and strong institutional infrastructure can contribute to the moderation of economic policy uncertainty, which deters FDI inflows.Contribution/Originality: This study contributes significantly to the growing literature on determinants of FDI inflows by examining the critical roles of institutions, economic policy uncertainty and other key decisive factors in FDI decisions by applying the dynamic panel data estimations proposed by Kripfganz (2017) as a distinct methodology alongside the two-step GMM system proposed by Blundell & Bond (1998) on a wider selection of countries.

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“…A1-Fawwaz (2016), examined the determinants of external debt in Jordan and found that there is a positive and significant effect of terms of trade; and negative and significant GDP per capita on external debt. Adamu and Rasiah (2013),in the study 'On the determinants of external debt in Nigeria' with the data from 1970 to 2013, using the ARDL approach, revealed that oil price, debt service, and gross domestic saving play a significant role in determining external debt and exchange rate. They also discovered that fiscal deficit contributes to building up external debt.…”

Section: The Tax Smoothing Theorymentioning

confidence: 99%

Macroeconomic determinants of external debt in Nepal: The ARDL Approach

Mahara¹,

Dhakal²

2020

QJMSS

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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.

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On the Determinants of External Debt in Nigeria

Cited by 8 publications

References 37 publications

Macroeconomic determinants of external indebtedness of Ethiopia: ARDL approach to co-integration

Macroeconomic determinants of external indebtedness of Ethiopia: ARDL approach to co-integration

Do Good Institutions and Economic Uncertainty Matter to Foreign Direct Investment?

Macroeconomic determinants of external debt in Nepal: The ARDL Approach

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