Targeting debt in Lebanon: a structural macro-econometric model

Araji, Salim; Hlásny, Vladimír; Mansour-Ichrakieh, Layal; Intini, Vito

doi:10.1080/17938120.2019.1583508

Cited by 4 publications

(1 citation statement)

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“…The findings concluded that the level of debt is unsustainable in Pakistan. The heavy reliance on debt is observed by Anwer (2000), who reported that it is due to high dependency on the IMF and World Bank. High reliance on debt to correct the current account deficit makes it not sustainable and only increases financial vulnerability and recession that ultimately tends to reschedule debt.…”

Section: Literature Reviewmentioning

confidence: 99%

Targeting Debt in Pakistan: A Structural Macro-Econometric Model

Fatemah,

Haq

2024

iRASD J. Eco.

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Unsustainable debt levels pose serious economic risks, potentially leading to financial instability when repayments become challenging. This paper investigates the intricate dynamics of Pakistan's debt. It aims to assess its sustainability within a broader eclectic and dynamic framework of responsible fiscal management using macro-econometric analysis. A structural macro-econometric model (MEM) based on five blocks has been developed, i.e., Government, Price, Real, Monetary, and External sectors. Moreover, it comprises sixteen behavioral equations along with ten identities. The Generalized Method of Moments (GMM) has been used to estimate the system of behavioral equations and identities to solve the endogeneity problem, while the Guass-Seidel algorithm is used for model simulation purposes, including dynamic & stochastic simulations. Forecasting has been done from 2023 – 2030. Moreover, three main policy variables, i.e., inflation, exchange rate, and government expenditures, have been given shocks to evaluate their impact on future external borrowing, interest payments along with imports, exports, and net foreign and domestic assets. The results revealed that an effective monetary & fiscal policy must be designed to stabilize the economic conditions to manage external debt and repayments effectively. Moreover, to cope with unsustainable debt conditions, it is required to follow strict fiscal discipline via designing & adhering to a budget that prioritizes inflationary controls and responsible spending practices.

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Section: Literature Reviewmentioning

confidence: 99%