Debt Sustainability in Low-Income Countries: Policies, Institutions, or Shocks?

Gündüz, Yasemin Bal

doi:10.5089/9781475599732.001

Cited by 5 publications

(20 citation statements)

References 34 publications

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“…This is in contrast to some empirical literature, Gourinchas and Obstfeld (2012) for example, showed that public debt and output gap were statistically insignificant as debt crisis predictors. Our results however are in keeping with Gündüz (2017) and Herz and Tong (2008) findings.…”

Section: Results Analysissupporting

confidence: 92%

“…Non-energy prices on the hand includes metals (31.6%), Agricultural commodities (64.9%) and Fertiliser (3.6%). No attempt is made to create country specific commodity prices in the spirit of (Bazzi and Blattman 2014), instead all commodity prices are time-specific variables as used by Gündüz (2017).…”

Section: Methodsmentioning

confidence: 99%

“…Countries are then rated on a scale of 1 to 7, high scores being the worst 13 . (Gündüz 2017) argue that reforming economic institutions is difficult because institutions are dependent on the prevailing political framework and political power distribution in society. Thus it seems that economic institutions are perhaps dependent on the quality of civil liberties and political freedoms.…”

Section: Potential Predictorsmentioning

confidence: 99%

“…Many point to the rising debt levels which are believed to be unsustainable. Gündüz (2017) argue that external shocks to LICs, such as adverse shocks to commodity prices, could lead to a wave of defaults. Kraay and Nehru (2006) empirical evidence emphasise the importance of institutional policies in the occurrence of debt crisis in low-income countries.…”

Section: Introductionmentioning

confidence: 99%

“…The Debt Sustainability Framework was therefore formulated based on the influential paper of Kraay and Nehru (2006) findings. Gündüz (2017) also highlights that multilateral institutions now places greater emphasis on quality of institutions. Since lenders are worried about credit defaults, institutional policies or quality of governance should therefore be a significant determinant of credit events.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Prediction of debt crisis in Southern African Development Community (SADC)

Chirume

2022

International Area Studies Review

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Debt levels in the Southern African Development Community (SADC) have been rising over the years as countries undertake infrastructure projects and the increased use of bilateral and private credit. Although on aggregate the debt levels are within SADC recommendations on macroeconomic convergence, there are growing fears that a number of countries in the region might default and indeed some are already in default. The frequent occurrence of debt crisis is a cause for concern. This research is an attempt to determine the significant predictors from a small set of variables commonly touted as important in debt crisis prediction. The research considered the output gap, real exchange rate, external debt ratios, commodity shocks and quality of governance as potential predictors. The factor variables being of particular interest Empirical findings on these potential predictors is somehow mixed, which partly is accounted for by the differences in model specifications from author to author. The research employed the event study and fixed effects logistic regression for modelling the probability of default of public debt. Results of the model illustrate that governance indicators and commodity price shocks (global level) were not statistically significant predictors of debt crisis as commonly suggested by theory. However the external debt, output and the real foreign exchange rate were all significant. Real output was shown to be one of the most important predictors of debt crisis. The estimated probability model fared relatively better than a random model.

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Section: Results Analysissupporting

confidence: 92%

Section: Methodsmentioning

confidence: 99%

Section: Potential Predictorsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Prediction of debt crisis in Southern African Development Community (SADC)

Chirume

2022

International Area Studies Review

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Empirical examination of public debt sustainability in African economies: A panel data analysis

Shah,

Rafique,

Afridi

2023

Journal of Public Affairs

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This study intends to investigate public debt sustainability across 29 Sub‐Sahara African (SSA) economies, employing various econometric specifications, for the sampled years 1996–2020. The study employs Bohn's (Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint? Journal of monetary Economics, 54(7), pp.1837–1847.) framework of sustainability as the baseline model to assess public debt sustainability across the sampled Sub‐Sahara African economies. As additional tests of public debt sustainability in order to support the baseline findings, the study also employs panel unit root and timeseries unit tests. The baseline findings from the OLS, panel quantile and instrumental panel quantile regressions show that public debt is sustainable across the panel of SSA economies. The positive and statistically significant response of primary balance under the Bohn's framework of sustainability manifest that the intertemporal budget constraint is not violated in the sampled economies. The consistency in the estimates under the OLS, panel quantile and instrumental panel quantile regressions also show that the estimates are robust throughout the estimation process. Also, utilizing the panel unit root test for public debt sustainability, the findings show that public debt is stationary over the sampled years which implies that intertemporal budget constraint holds and that public debt is sustainable across the sampled SSA economies. However, the timeseries analysis indicate that although majority of the SSA economies have sustainable public debt ratios, four countries namely Uganda, Sudan, Togo and Cote d'Ivoire have unsustainable public debt ratios. The study has important policy implications in terms of prudent public debt management and fiscal management for the sampled SSA economies.

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The environmental Kuznets curve in the presence of corruption in developing countries

Masron

Subramaniam

2018

Environ Sci Pollut Res

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Environmental degradation is at an alarming level in developing economies. The present paper examines the direct and indirect impacts of corruption on environmental deterioration using the panel data of 64 developing countries. Adopting the generalized method of moments (GMM) technique, the paper finds evidence that corruption exhibits a positive impact on pollution. Subsequently, there is also evidence indicating that the level of pollution tends to be higher in countries with a higher level of corruption, eliminating the effectiveness of income effect on environmental preservation. These results also suggest that environmental degradation is monotonically increasing with higher corruption and invalidate the presence of the EKC. Hence, a policy focuses that an anti-corruption particularly in the environmental and natural resources sector needs to be emphasized and enforced in order to reduce or possibly to totally eliminate the rent for corruption.

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Debt Sustainability in Low-Income Countries: Policies, Institutions, or Shocks?

Cited by 5 publications

References 34 publications

Prediction of debt crisis in Southern African Development Community (SADC)

Prediction of debt crisis in Southern African Development Community (SADC)

Empirical examination of public debt sustainability in African economies: A panel data analysis

The environmental Kuznets curve in the presence of corruption in developing countries

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