ABSTRACT This study examines the impact of external debt on the level of economic growth and the volume of investment in Nigeria between 1980 and 2008. We adopt the Debt Cum-Growth model along with the Investment model while the... more
ABSTRACT
This study examines the impact of external debt on the level of economic growth and the volume of investment in Nigeria
between 1980 and 2008. We adopt the Debt Cum-Growth model along with the Investment model while the econometrics
analysis techniques of multiple regressions were employed. The result of the analysis indicates that there exists a positive
relationship between external debt, economic growth and Investment; this was confirmed by the coefficient of
determination (R2) of about 79.8% .While the findings reveal that the current external debt ratio of GDP stimulates growth
in the short term, the Private Investment which is measure of real and tangible development shows a decline. The study
recommends among others that government should ensure that appropriate measures are put in place to achieve optimal use
of borrowed funds so that servicing such funds will not invoke economic crises and erode the level of private investment
which is central to the overall economic growth and development.
KEYWORDS: Debt overhang, debt rescheduling, debt burden, Investment, Consumption, Illiquidity
This paper investigates the impact on the wealth of bank share holders on the transfer of official resources to the debtor countries. The main aim was to derive actual estimates of increases in shareholder wealth following important news... more
This paper investigates the impact on the wealth of bank share holders on the transfer of official resources to the debtor countries. The main aim was to derive actual estimates of increases in shareholder wealth following important news concerning future transfers from the multilaterals to the debtor nations. The main result, is that stock market expects virtually all additional resources
Based on the failure of the post-World War I German reparations, it is commonly assumed that little or no payment can be coerced from a defeated opponent. However, occupation charges paid by France to Nazi Germany between 1940 and 1944... more
Based on the failure of the post-World War I German reparations, it is commonly assumed that little or no payment can be coerced from a defeated opponent. However, occupation charges paid by France to Nazi Germany between 1940 and 1944 represent one of the largest recorded international transfers and contributed significantly to financing the overall German war effort. This case study uses a neoclassical growth model that incorporates essential features of the occupied economy and the postwar stabilization to assess the welfare costs of the policies that managed the payments to Germany. Surprisingly, the methods used to make these transfers closely resembled the techniques employed by contemporary belligerents. Occupation payments required a 16 percent reduction of consumption for twenty years, with the draft of labor to Germany and wage and price controls adding substantially to this burden. France's postwar debt overhang would have demanded large budget surpluses; but inflati...
The privileging of internal resources over external finance is not only the most democratic but also the most politically desirable option. The implications of the ADB loan for Kerala is situated against this premise by employing an... more
The privileging of internal resources over external finance is not only the most democratic but also the most politically desirable option. The implications of the ADB loan for Kerala is situated against this premise by employing an empirical political economy method. The paper is divided into five sections. In section 1, along with the structure of the loan, the current status of state finance is briefly outlined. Section 11 explores two hypotheses: the Resource Mobilisation Crisis Hypothesis and the Debt Overhang Hypothesis. In section 111, the socio-political implications of the ADB loan are discussed in the context of the conditionalities imposed. In section IV, viable alternatives are analysed with special emphasis on internal resource mobilisation and section V summarises observations. It is pointed out that the debt sustainability in Kerala was foreclosed by the late 90s with the state is in debt overhang. The ADB loan would only be an attack on the fiscal health of the state...
The price of debt on the secondary market reflects the risk that the debtor country might default on its external debt. Using the option-pricing theory, the authors identify the factors that influenced the risk of default in six highly... more
The price of debt on the secondary market reflects the risk that the debtor country might default on its external debt. Using the option-pricing theory, the authors identify the factors that influenced the risk of default in six highly indebted countries (Argentina, Brazil, Chile, Mexico, Venezuela, and Poland) from 1986 to 1990. In particular, they provide a measure of the debtor countries'willingness to pay. They identify the parameters of the stochastic process followed by this variable, so this approach can be used to predict the future price of debt. Their model also emphasizes that a debt-reduction operation may lead to a significant increase in the price of debt on the secondary market. This effect appears to be linked to the initial stock of external debt, as suggested by the debt overhang hypothesis. Finally, the authors show empirically that a country's willingness to pay is significantly influenced by changes in indicators of thecountry's ability to pay (for e...
Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and... more
Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment through several channels. This Commentary explains one of them—debt overhang can cause firms to underinvest—and points to ways in which this effect might
This study examines the impact of external debt on the level of economic growth and the volume of investment in Nigeria between 1980 and 2008. We adopt the Debt Cum-Growth model along with the Investment model while the econometrics... more
This study examines the impact of external debt on the level of economic growth and the volume of investment in Nigeria between 1980 and 2008. We adopt the Debt Cum-Growth model along with the Investment model while the econometrics analysis techniques of multiple regressions were employed. The result of the analysis indicates that there exists a positive relationship between external debt, economic growth and Investment; this was confirmed by the coefficient of determination (R 2 ) of about 79.8% .While the findings reveal that the current external debt ratio of GDP stimulates growth in the short term, the Private Investment which is measure of real and tangible development shows a decline. The study recommends among others that government should ensure that appropriate measures are put in place to achieve optimal use of borrowed funds so that servicing such funds will not invoke economic crises and erode the level of private investment which is central to the overall economic gro...
