Government debt is an indirect debt of the taxpayers, and can be classified as internal or external.
Debt crisis is the general term for a proliferation of massive public debt relative to tax revenues.Public debt
enables governments to invest in critical areas of the economy where the capacity of tax revenue to undertake
these projects may be limited or in situations where printing additional money will disrupt the stability of the
economy. Government borrows in order defer difficult but necessary reforms such as the imposition of taxes
which might be necessary to generate revenue for development. Countries with high public debt tend to grow
slowly. The study examines the origin of debt crisis in Zimbabwe, debt nature, causes, consequences and
possible ways of reducing the debt. The study uses 1980-2013 data to run an OLS model on economic growth
using STATA Econometric Software, in an effort to explore the effect of external debt. The regression results
shows that public debt has a negative effect on economic growth in Zimbabwe, which has varying theories
prevailing. The study concludes by encouraging the government not to borrow unnecessarily, and to use
borrowed funds for investment projects, rather than on consumption expenditure
The document discusses the rising levels of public debt in advanced countries and the challenges this poses. It notes that debt levels above 100% of GDP were common after WWII but issues are more serious now due to aging populations. Modeling of debt projections for 30 years out shows debt could rise to 3 times current levels without policy changes to address aging populations and the associated rise in spending. Higher debt levels increase risks of unstable dynamics and lower long term growth. Action is needed now to address long term fiscal imbalances.
FRB-Richmond_ unsustainable fiscal policy_ implications for monetary policyFred Kautz
Economic research suggests that high debt levels ultimately could overwhelm a central bank’s efforts to keep prices stable. This essay will argue that these outcomes should be avoided in the United States by putting fiscal policy on a sustainable path.
This document discusses fiscal policy in Latin American countries. It notes that international institutions traditionally advocated fiscal consolidation through austerity measures. However, some South American governments in the 2000s abandoned neoliberal policies in favor of growth with stable public policies. Data shows that these "Pink" countries experienced higher economic growth and declining public debt compared to other Latin American nations, though inequality remained an issue. While these governments had more autonomy, international credit markets still imposed conditions that limited their fiscal policy sovereignty.
1) The document discusses concerns around increasing public debt levels in advanced economies and how this may hamper future growth. It outlines the economic impacts of the 2008 financial crisis and rising debt levels globally.
2) It analyzes different policy options for addressing high debt such as debt restructuring, inflation, fiscal consolidation, and promoting economic growth. Each option is assessed in terms of strengths, weaknesses and feasibility.
3) The recommendation is that no single approach will work and a combination of transparency, accountability, fiscal repression, and selective fiscal consolidation can help curb debt growth while promoting economic recovery.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
This document summarizes Tanzania's macroeconomic performance from 2008-2011. Key points include:
- GDP growth averaged 7.2% annually, driven by mining, financial services, transport, and manufacturing.
- Inflation remained under 10% until late 2008 when it rose to over 13% but fell back to 7% by 2010.
- Money supply and capital formation increased each year. Interest rates and exchange rates fluctuated.
- Foreign reserves grew steadily, reaching over $3.9 billion in 2010, covering over 6 months of imports.
- Challenges implementing Tanzania's national development plan included insufficient funding and the global economic crisis.
THE EFFECT OF EXTERNAL DEBT ON ECONOMIC GROWTH OF NIGERIA[1]Chinelo Ezenwa
This document is a title page for a student project on analyzing the effect of external debt on Nigeria's economic growth from 1981 to 2010. It includes the student's name, identification number, department, university, supervisor's name, and date. The project will have 5 chapters: introduction, literature review, research methodology, data presentation and analysis, and conclusion and recommendations. The introduction will provide background on Nigeria's external debt, problem statement, objectives, hypotheses, and significance of the study. The literature review will cover Nigeria's debt history, external debt management, opinions on the topic, debt impact on growth, and limitations of previous studies. The methodology chapter will describe the research approach, models, analytical techniques, and data sources. Sub
Briefing Note: Can regular government publication of indicators play a role i...Antony Upward
A briefing note to the Premier of Ontario, reviewing the benefits of moving to publish an alternative to GDP on a regular basis - for example Genuine Progress Indicator (GPI) and Gross National Happiness (GNH).
For my York University / Schulich School of Business Graduate Degree in Environmental Studies / Graduate Diploma in Business and the Environment.
The document discusses the rising levels of public debt in advanced countries and the challenges this poses. It notes that debt levels above 100% of GDP were common after WWII but issues are more serious now due to aging populations. Modeling of debt projections for 30 years out shows debt could rise to 3 times current levels without policy changes to address aging populations and the associated rise in spending. Higher debt levels increase risks of unstable dynamics and lower long term growth. Action is needed now to address long term fiscal imbalances.
FRB-Richmond_ unsustainable fiscal policy_ implications for monetary policyFred Kautz
Economic research suggests that high debt levels ultimately could overwhelm a central bank’s efforts to keep prices stable. This essay will argue that these outcomes should be avoided in the United States by putting fiscal policy on a sustainable path.
This document discusses fiscal policy in Latin American countries. It notes that international institutions traditionally advocated fiscal consolidation through austerity measures. However, some South American governments in the 2000s abandoned neoliberal policies in favor of growth with stable public policies. Data shows that these "Pink" countries experienced higher economic growth and declining public debt compared to other Latin American nations, though inequality remained an issue. While these governments had more autonomy, international credit markets still imposed conditions that limited their fiscal policy sovereignty.
1) The document discusses concerns around increasing public debt levels in advanced economies and how this may hamper future growth. It outlines the economic impacts of the 2008 financial crisis and rising debt levels globally.
2) It analyzes different policy options for addressing high debt such as debt restructuring, inflation, fiscal consolidation, and promoting economic growth. Each option is assessed in terms of strengths, weaknesses and feasibility.
3) The recommendation is that no single approach will work and a combination of transparency, accountability, fiscal repression, and selective fiscal consolidation can help curb debt growth while promoting economic recovery.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
This document summarizes Tanzania's macroeconomic performance from 2008-2011. Key points include:
- GDP growth averaged 7.2% annually, driven by mining, financial services, transport, and manufacturing.
- Inflation remained under 10% until late 2008 when it rose to over 13% but fell back to 7% by 2010.
- Money supply and capital formation increased each year. Interest rates and exchange rates fluctuated.
- Foreign reserves grew steadily, reaching over $3.9 billion in 2010, covering over 6 months of imports.
- Challenges implementing Tanzania's national development plan included insufficient funding and the global economic crisis.
THE EFFECT OF EXTERNAL DEBT ON ECONOMIC GROWTH OF NIGERIA[1]Chinelo Ezenwa
This document is a title page for a student project on analyzing the effect of external debt on Nigeria's economic growth from 1981 to 2010. It includes the student's name, identification number, department, university, supervisor's name, and date. The project will have 5 chapters: introduction, literature review, research methodology, data presentation and analysis, and conclusion and recommendations. The introduction will provide background on Nigeria's external debt, problem statement, objectives, hypotheses, and significance of the study. The literature review will cover Nigeria's debt history, external debt management, opinions on the topic, debt impact on growth, and limitations of previous studies. The methodology chapter will describe the research approach, models, analytical techniques, and data sources. Sub
Briefing Note: Can regular government publication of indicators play a role i...Antony Upward
A briefing note to the Premier of Ontario, reviewing the benefits of moving to publish an alternative to GDP on a regular basis - for example Genuine Progress Indicator (GPI) and Gross National Happiness (GNH).
For my York University / Schulich School of Business Graduate Degree in Environmental Studies / Graduate Diploma in Business and the Environment.
This document summarizes the structure and profile of Philippine public debt from 1990 to 2009. It discusses the sources, categories, and maturity of domestic and foreign public debt. Domestic debt is dominated by treasury bills and bonds, with maturities lengthening over time. Foreign debt is primarily from commercial and multilateral creditors, denominated in US dollars and Japanese yen, and remains largely long-term. Both domestic and foreign debt levels increased substantially over this period relative to GDP.
The document discusses the Philippine debt crisis, including definitions of external, internal, and national debt. It provides background on debt crises in general and risks of debt crises for countries. Specific data is presented on the Philippines' external debt, GDP, GDP growth, government debt as a percentage of GDP, budget deficit, exchange rate between the Philippine peso and US dollar, and how the government pays its external debt obligations. The document estimates that based on the 2015 budget, the Philippines faces an annual deficit of P439.03 billion for debt service payments that could potentially lead to a debt crisis if not addressed.
The Least Developed Countries Report 2011 puts forward a policy framework for enhancing the development impact of South–South cooperation, and proposes ways to leverage South–South financial cooperation for development in the LDCs.
1. China has experienced a dramatic economic rise fueled by cheap labor, investment, and exports, but this growth has been built on unsustainable levels of debt and a fragile financial system.
2. China is at high risk of a financial crisis in the next few years as liquidity growth slows and debt levels surpass 225% of GDP, with corporate and shadow banking debt posing significant risks.
3. While China can take steps like developing its bond market, increasing consumption and reducing unproductive investment will be difficult due to political opposition, so a crisis may be needed to force meaningful reforms.
CCIC - Statistical Analysis of Official Development AssistanceSebastien Winsor
This document analyzes trends in official development assistance (ODA) provided by countries in the Organization for Economic Cooperation and Development (OECD). It finds that while total ODA has generally increased over time in current prices, the rate of increase has not kept pace with economic growth. As a percentage of gross national income, ODA levels have fluctuated and remain well below the UN target of 0.7%. The analysis also examines trends in Canadian ODA and budget cuts that have decreased Canada's ODA in recent years.
Public debt in India has increased over 7 times from 1990-1991 to 2005-2006. It includes money borrowed by the government through internal loans within India and external loans from international organizations. There are several types of public debt like short-term, long-term, productive and unproductive debts. While public debt allows the government to fund development projects, it also burdens citizens with increased taxes and can adversely affect growth. Proper management of public debt is needed in India through reducing expenditures, encouraging foreign investment, and monitoring public spending.
The document discusses the origins and theories of public borrowing and debt. It outlines different periods and schools of thought around public debt, from mercantilism and Adam Smith's criticisms of borrowing, to Keynes' theory of deficit financing. The document also examines development finance models and how borrowing from international organizations like the IMF and World Bank became prominent sources of funds for developing countries pursuing infrastructure and other development projects.
Effect of payment balance and current account on deficit of jordanian budget ...Alexander Decker
This document discusses the relationship between Jordan's budget deficit, current account deficit, and payment balance deficit from 1992-2012. It analyzes the impact of fiscal adjustments from 1996-1999 and subsequent events and policies. The main findings are that there is one cointegration relationship between the variables, indicating a long-term relationship. If no action is taken on the budget deficit, dynamic relationships will persist between these deficits.
Why we will not experience a DepressionGaetan Lion
- The document discusses how government interventions on an unprecedented scale, including fiscal stimulus packages, monetary policy actions, and financial industry bailouts, will help prevent another Great Depression.
- During the Great Depression, bad government policies exacerbated the situation, but current interventions aim to stimulate the economy and stabilize financial markets.
- Corporations, small businesses, and households have strong financial positions and ability to finance themselves, giving government policies time to take effect before a depression could occur.
Impact of macroeconomic variables on government budget deficit in nigeriaAlexander Decker
This document examines the relationship between macroeconomic variables and government budget deficits in Nigeria from 1981 to 2010. It finds that real GDP, inflation, exchange rate, interest rate, government budget deficit, and gross investment are cointegrated, indicating a long-run relationship. However, there is no statistical significance between budget deficits and economic growth in Nigeria. The paper recommends improving economic and political institutions to enhance policymaking, fully implementing fiscal responsibility acts to reduce leakage, and decreasing corruption to achieve fiscal responsibility.
External debt played both positive and negative roles in Pakistan's economic growth from 2000-2007. Pakistan faced a debt crisis in the late 1990s as external debt increased from $19.2 billion in 1990 to $33.6 billion in 1999. Musharraf's government took steps to reduce this debt burden through policies like the "debt limitation law" and debt was successfully managed after 2001 when Pakistan supported the US war on terror. While debt was reduced, continued management will be needed to encourage sectors like industry and agriculture and meet fiscal gaps.
This document provides information about the national debt of the United States from an organization called "Fix the Debt". It discusses that the current national debt is over $13 trillion and is projected to continue rising without action. It outlines some of the main causes of the debt as well as the effects, including higher costs of living and reduced ability to respond to future crises. It argues that reforms are needed to entitlement programs, taxes, and spending to put the debt on a sustainable long-term path.
Bangladesh relies heavily on external assistance to finance development projects and address its balance of payments deficits. While its external debt levels have increased over time, most indicators of debt sustainability remain within thresholds. The ratio of external debt to GDP declined after 2002 to 22.3% in 2010/11 due to strong GDP growth. The ratio of external debt service to exports stabilized below 20% after 1998/99. The ratio of debt to exports declined due to export growth and was below 150% since 2004/05. The ratio of debt to revenue fell below 250% after 2007/08, indicating Bangladesh's ability to service its debt with government revenues. However, declining grants and rising debt service payments remain concerns for long-term debt sustainability without
This document discusses the effects of inflation targeting and low interest rates on the development and bursting of the 2008 housing market bubble and credit crisis. It argues that keeping interest rates too low for too long from 2002 to 2004 accelerated housing activity and the sale of mortgages, fueling the growth of a housing bubble. When interest rates were then raised sharply from 2004 to 2006, this likely triggered the bursting of the bubble, as high household debt levels caused disposable incomes to decline sharply. The rapid spread of the subprime mortgage crisis then led to a global financial crisis.
Public borrowing is money that governments borrow to fund public spending and services. When government revenues from taxes are insufficient, governments take on debt through public borrowing to finance expenditures. This includes borrowing domestically from its own resources as well as externally from foreign countries. The Philippines has a significant amount of public debt, with over 10 trillion Philippine pesos in total debt as of 2020. A large portion of this is owed to foreign lenders like the World Bank and IMF, who provide loans to support development projects and address economic crises.
The document discusses the recent turmoil in global financial markets and argues that governments have failed to address the root causes of the economic crisis. It makes three key points:
1) Stock market declines show that the recovery is fragile and a double-dip recession may be on the horizon.
2) Governments have kicked the can down the road rather than fixing underlying problems, and the global economic landscape now has additional constraints making responses more difficult.
3) The US economy in particular remains weak with high unemployment, stagnant GDP, and a large budget deficit, showing similarities to Japan's "lost decade" raising the risk of prolonged low growth in the US.
The document summarizes information about the national debt of the United States from the organization Fix the Debt. It discusses that the national debt is over $18 trillion and growing due to spending exceeding revenue in recent decades. It also notes that the debt levels threaten economic growth and flexibility and will require action to reduce the debt through tax and spending reforms.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Este documento describe una organización benéfica que brinda un hogar y apoyo a niños con cáncer de escasos recursos y sus familias. La misión es crear conciencia pública y brindar asilo, satisfaciendo las necesidades básicas y ofreciendo apoyo emocional. La visión es ser conocidos como una asociación altruista que brinda estadía gratuita a niños con cáncer. La organización también elabora mermeladas para generar ingresos y sustentar los gastos de brindar servicios a los niños y padres.
Effect of Stock Price Index in Global Stock againstComposite Stock Price Inde...iosrjce
1) The document analyzes the influence of various global stock price indices (Dow Jones Industrial Average, Nikkei 225, Hang Seng Index, Shanghai Stock Exchange Composite Index) on Indonesia's Composite Stock Price Index from January 2008 to December 2013.
2) It finds that the global indices generally have a positive influence on Indonesia's index, with the Dow Jones having the strongest effect. The Dow Jones explains about 73% of movements in Indonesia's index.
3) The study concludes that because of globalization and investors, stock price movements in one exchange influence others, so global economic conditions are reflected in Indonesia's stock market through these linkages with major world indices.
This document summarizes the structure and profile of Philippine public debt from 1990 to 2009. It discusses the sources, categories, and maturity of domestic and foreign public debt. Domestic debt is dominated by treasury bills and bonds, with maturities lengthening over time. Foreign debt is primarily from commercial and multilateral creditors, denominated in US dollars and Japanese yen, and remains largely long-term. Both domestic and foreign debt levels increased substantially over this period relative to GDP.
The document discusses the Philippine debt crisis, including definitions of external, internal, and national debt. It provides background on debt crises in general and risks of debt crises for countries. Specific data is presented on the Philippines' external debt, GDP, GDP growth, government debt as a percentage of GDP, budget deficit, exchange rate between the Philippine peso and US dollar, and how the government pays its external debt obligations. The document estimates that based on the 2015 budget, the Philippines faces an annual deficit of P439.03 billion for debt service payments that could potentially lead to a debt crisis if not addressed.
The Least Developed Countries Report 2011 puts forward a policy framework for enhancing the development impact of South–South cooperation, and proposes ways to leverage South–South financial cooperation for development in the LDCs.
1. China has experienced a dramatic economic rise fueled by cheap labor, investment, and exports, but this growth has been built on unsustainable levels of debt and a fragile financial system.
2. China is at high risk of a financial crisis in the next few years as liquidity growth slows and debt levels surpass 225% of GDP, with corporate and shadow banking debt posing significant risks.
3. While China can take steps like developing its bond market, increasing consumption and reducing unproductive investment will be difficult due to political opposition, so a crisis may be needed to force meaningful reforms.
CCIC - Statistical Analysis of Official Development AssistanceSebastien Winsor
This document analyzes trends in official development assistance (ODA) provided by countries in the Organization for Economic Cooperation and Development (OECD). It finds that while total ODA has generally increased over time in current prices, the rate of increase has not kept pace with economic growth. As a percentage of gross national income, ODA levels have fluctuated and remain well below the UN target of 0.7%. The analysis also examines trends in Canadian ODA and budget cuts that have decreased Canada's ODA in recent years.
Public debt in India has increased over 7 times from 1990-1991 to 2005-2006. It includes money borrowed by the government through internal loans within India and external loans from international organizations. There are several types of public debt like short-term, long-term, productive and unproductive debts. While public debt allows the government to fund development projects, it also burdens citizens with increased taxes and can adversely affect growth. Proper management of public debt is needed in India through reducing expenditures, encouraging foreign investment, and monitoring public spending.
The document discusses the origins and theories of public borrowing and debt. It outlines different periods and schools of thought around public debt, from mercantilism and Adam Smith's criticisms of borrowing, to Keynes' theory of deficit financing. The document also examines development finance models and how borrowing from international organizations like the IMF and World Bank became prominent sources of funds for developing countries pursuing infrastructure and other development projects.
Effect of payment balance and current account on deficit of jordanian budget ...Alexander Decker
This document discusses the relationship between Jordan's budget deficit, current account deficit, and payment balance deficit from 1992-2012. It analyzes the impact of fiscal adjustments from 1996-1999 and subsequent events and policies. The main findings are that there is one cointegration relationship between the variables, indicating a long-term relationship. If no action is taken on the budget deficit, dynamic relationships will persist between these deficits.
Why we will not experience a DepressionGaetan Lion
- The document discusses how government interventions on an unprecedented scale, including fiscal stimulus packages, monetary policy actions, and financial industry bailouts, will help prevent another Great Depression.
- During the Great Depression, bad government policies exacerbated the situation, but current interventions aim to stimulate the economy and stabilize financial markets.
- Corporations, small businesses, and households have strong financial positions and ability to finance themselves, giving government policies time to take effect before a depression could occur.
Impact of macroeconomic variables on government budget deficit in nigeriaAlexander Decker
This document examines the relationship between macroeconomic variables and government budget deficits in Nigeria from 1981 to 2010. It finds that real GDP, inflation, exchange rate, interest rate, government budget deficit, and gross investment are cointegrated, indicating a long-run relationship. However, there is no statistical significance between budget deficits and economic growth in Nigeria. The paper recommends improving economic and political institutions to enhance policymaking, fully implementing fiscal responsibility acts to reduce leakage, and decreasing corruption to achieve fiscal responsibility.
External debt played both positive and negative roles in Pakistan's economic growth from 2000-2007. Pakistan faced a debt crisis in the late 1990s as external debt increased from $19.2 billion in 1990 to $33.6 billion in 1999. Musharraf's government took steps to reduce this debt burden through policies like the "debt limitation law" and debt was successfully managed after 2001 when Pakistan supported the US war on terror. While debt was reduced, continued management will be needed to encourage sectors like industry and agriculture and meet fiscal gaps.
This document provides information about the national debt of the United States from an organization called "Fix the Debt". It discusses that the current national debt is over $13 trillion and is projected to continue rising without action. It outlines some of the main causes of the debt as well as the effects, including higher costs of living and reduced ability to respond to future crises. It argues that reforms are needed to entitlement programs, taxes, and spending to put the debt on a sustainable long-term path.
Bangladesh relies heavily on external assistance to finance development projects and address its balance of payments deficits. While its external debt levels have increased over time, most indicators of debt sustainability remain within thresholds. The ratio of external debt to GDP declined after 2002 to 22.3% in 2010/11 due to strong GDP growth. The ratio of external debt service to exports stabilized below 20% after 1998/99. The ratio of debt to exports declined due to export growth and was below 150% since 2004/05. The ratio of debt to revenue fell below 250% after 2007/08, indicating Bangladesh's ability to service its debt with government revenues. However, declining grants and rising debt service payments remain concerns for long-term debt sustainability without
This document discusses the effects of inflation targeting and low interest rates on the development and bursting of the 2008 housing market bubble and credit crisis. It argues that keeping interest rates too low for too long from 2002 to 2004 accelerated housing activity and the sale of mortgages, fueling the growth of a housing bubble. When interest rates were then raised sharply from 2004 to 2006, this likely triggered the bursting of the bubble, as high household debt levels caused disposable incomes to decline sharply. The rapid spread of the subprime mortgage crisis then led to a global financial crisis.
Public borrowing is money that governments borrow to fund public spending and services. When government revenues from taxes are insufficient, governments take on debt through public borrowing to finance expenditures. This includes borrowing domestically from its own resources as well as externally from foreign countries. The Philippines has a significant amount of public debt, with over 10 trillion Philippine pesos in total debt as of 2020. A large portion of this is owed to foreign lenders like the World Bank and IMF, who provide loans to support development projects and address economic crises.
The document discusses the recent turmoil in global financial markets and argues that governments have failed to address the root causes of the economic crisis. It makes three key points:
1) Stock market declines show that the recovery is fragile and a double-dip recession may be on the horizon.
2) Governments have kicked the can down the road rather than fixing underlying problems, and the global economic landscape now has additional constraints making responses more difficult.
3) The US economy in particular remains weak with high unemployment, stagnant GDP, and a large budget deficit, showing similarities to Japan's "lost decade" raising the risk of prolonged low growth in the US.
The document summarizes information about the national debt of the United States from the organization Fix the Debt. It discusses that the national debt is over $18 trillion and growing due to spending exceeding revenue in recent decades. It also notes that the debt levels threaten economic growth and flexibility and will require action to reduce the debt through tax and spending reforms.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Este documento describe una organización benéfica que brinda un hogar y apoyo a niños con cáncer de escasos recursos y sus familias. La misión es crear conciencia pública y brindar asilo, satisfaciendo las necesidades básicas y ofreciendo apoyo emocional. La visión es ser conocidos como una asociación altruista que brinda estadía gratuita a niños con cáncer. La organización también elabora mermeladas para generar ingresos y sustentar los gastos de brindar servicios a los niños y padres.
Effect of Stock Price Index in Global Stock againstComposite Stock Price Inde...iosrjce
1) The document analyzes the influence of various global stock price indices (Dow Jones Industrial Average, Nikkei 225, Hang Seng Index, Shanghai Stock Exchange Composite Index) on Indonesia's Composite Stock Price Index from January 2008 to December 2013.
2) It finds that the global indices generally have a positive influence on Indonesia's index, with the Dow Jones having the strongest effect. The Dow Jones explains about 73% of movements in Indonesia's index.
3) The study concludes that because of globalization and investors, stock price movements in one exchange influence others, so global economic conditions are reflected in Indonesia's stock market through these linkages with major world indices.
Economic Contribution of Women in Self Help Groups: Village Level Evidence fr...iosrjce
Women in Self Help Groups (SHGs) have made their mark in the rural economy in a quite nontraditional
way. This paper examines the economic contribution of SHG women drawing on a field survey
conducted in 20 villages by canvassing a structured schedule among 150 sample respondents of two blocks of
Balasore district in Odisha, India. The findings show that women in SHG’s have made a significantly positive
contribution to employment, income, expenditure and saving at the household level. An increase in the demand
for SHG products is required for improving productivity of women and enhancing their economic contribution
in a sustainable way. A reorientation in policy is suggested for generating awareness, upgrading skills and
expanding markets in order to augment their contribution and raise their empowerment level for the benefit of
the households as well as for transforming the rural economy in a big way.
Corporate Governance - A Broader Perspectiveiosrjce
In this paper it is argued that the notion of market-based corporate governance approach should be
broadened to include the problem of owner-controlled firms and large block-holders and should be generalized
to a model of multilateral negotiations and influence-seeking among a number of different stakeholders. In
practice such a model should incorporate checks and balances between various stakeholders and outside
constraints and must take into account how the political and legal system of a country affects this balance. In
fact, even if there is theoretical reason to believe that ownership with its incumbent benefits and costs belongs
to equity, this view is not dominant in most economies outside United Kingdom and United States of America.
The broader notion of corporate governance offers hope for understanding better the developing economies in
particular - and other economies in general - where anonymous stock markets are not likely to promote the
necessary entrepreneurial activity and corporate restructuring. It suggests that other mechanisms, such as
product market competition, peer pressure, or labor market activity, may compensate for this weakness, or more
realistically, may be more promising targets for legal or political reform than the stock market.
Government budget control under the period of inflation: Evidence from Madaga...iosrjce
Madagascar is rich in resource undermine, maritime and natural but have been experiencing
Inflation now for more than four decades. Many studies and papers talk about the relationship between Inflation
and Budget Deficit. This paper seeks to test the hypothesis that budget control explicated by the budget deficit
cause inflation in Madagascar with some variable economically affect the inflation such as Gross Domestic
Product, exchange rate, Money supply, budget deficits and political crises that is during a thirty-three years
period: from 1981to 2014. The methodology employed for estimating long-run relationship is Augmented Ducky
Fuller test for a stationary data then cointegration analysis, with undertaking Granger causality tests. The
findings of the study are Malagasy Budget control is not inflationary and the inflation didn’t explain the budget
control. But the variable that cause the inflation in Madagascar are the Political Crises and Money Supply
Artificial Financial Markets: Historical and Interdisciplinary Perspectiveiosrjce
This paper aims to present the architecture of an artificial stock market that considers the
microstructure of existing markets and understanding the complex patterns and phenomena that are observed in
economic systems. In agent-based financial market models, prices can be endogenously formed by the system
itself as the result of interaction of market participants. We identify and describe the tasks and choices that
different traders face based on their role in the market by tracing orders. We review the literature on these
models and analyze their strengths, weaknesses, opportunities, and threats with special focus on traders. We
conclude with seven recommendations to help guide the development of artificial markets as a venue for
technological innovation research.
The document provides a career summary, mission statement, skills, accomplishments, and qualifications for a web and application developer with 10 years of industry experience. Key skills include JavaScript, PHP, Linux, SQL, and database development. Responsibilities include developing web and desktop applications, maintaining websites, and troubleshooting. Educational background includes certificates in bioinformatics and computer languages.
Este documento describe cómo configurar un servidor de correo electrónico en Linux utilizando software libre. Explica los componentes clave como el agente de transferencia de correo (MTA) y los protocolos SMTP, POP3 e IMAP. Luego detalla los pasos para instalar y configurar Postfix y Dovecot, incluida la edición de archivos de configuración y el inicio de servicios.
An Analysis of the Relationship between Fiscal Deficits and Selected Macroeco...IOSR Journals
This study investigates the relationship that exists between the Government Deficit Spending and selected macroeconomic variables such as Gross Domestic Product (GDP), Exchange Rate, Inflation, Money Supply and Lending Interest Rate. The period covered is 1970 (when the civil war ended) and 2011. Ordinary Least Squares (OLS) technique was adopted to analyze the relationships. The study concludes that Government Deficit Spending (GDS) has positive significant relationship with GDP. Government Deficit Spending also has positive significant relationship with Exchange Rate, Inflation, and Money Supply. Government Deficit has negative significant relationship with Lending Interest Rate and most likely crowd-out the private sector by raising the cost of funds. Deficit spending has been known to have adverse effects on the economy and government is advised to curtail excessive deficit spending. It is recommended that further research is done to establish other variables that are affected by government deficit spending.
This document analyzes the real effects of different types of debt, including government, corporate, and household debt. The authors find that beyond certain thresholds, debt becomes a drag on economic growth. Specifically, their analysis of OECD countries from 1980 to 2010 finds that government debt above 85% of GDP, corporate debt above 90% of GDP, and household debt above 85% of GDP can negatively impact growth. The authors conclude that highly indebted countries need to reduce their debt levels to avoid harming long-term growth, which is made more difficult by aging populations in advanced economies.
After the US dollar replaced gold, the US debt became the attention worldwide, thus the demand for the US dollar continued, furthermore the extremely low interest of the dollar. This helped the US government to borrow great amounts of debt as well as kept the creditors pleased. Due to the pandemic, the US economy retrograded because of the tax cut and unproductive rescue spending plan plus surpassing spending of the government. The rising inflation starts to increase to high levels, which certainly the government must cut back spending or its patterns, while this will lead to uncertain consequences for the long future. This paper discusses several different perspectives on the US government's sustainability as its ability to settle the debt in future, the fate of growth burdened with that debt through the neoclassical mode of growth, and also the effect of anxiety of defaults and unfunded obligations. Inversely, it explores the strength of the dollar with a low-interest rate and its sustainability worldwide. We also propose ways helping of strengthen the fiscal government position and solutions to help the economy recover in long term and to easiest the situation. In the synopsis, we propose something that could affect and shake the global market.
Budget deficits occur when government spending exceeds revenue and add to the public debt. Causes of deficits include economic recessions, tax cuts without spending cuts, and increased spending on wars or disasters. Deficits can lead to higher debt levels, crowding out of private investment, and undermining essential services. Governments issue bonds to finance debt, and interest payments are a large expense. High debt risks default and can slow economic growth by diverting funds away from productive investments. Fiscal discipline, spending cuts or tax increases, and economic reforms can help reduce deficits.
The effect of external debt on economic growthSanjida Sarafat
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Growth-Debt Nexus: An Examination of Public Debt Levelsand Debt Crisis in Zimbabwe
1. IOSR Journal of Economics and Finance (IOSR-JEF)
e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 2. Ver. III (Mar.-Apr. 2015), PP 09-14
www.iosrjournals.org
DOI: 10.9790/5933-06230914 www.iosrjournals.org 9 | Page
Growth-Debt Nexus: An Examination of Public Debt Levelsand
Debt Crisis in Zimbabwe
1
Wellington Garikai Bonga, 2
Frank Chirowa, 3
Joseph Nyamapfeni
1
PhD Economics (AIU), MBA (ZOU), MSc Economics (UZ)
2
MPH (Global Health)-(TU), MSc Economics (UZ)
3
DCom Economics student (UNISA), MCom Industrial Strategy& Trade Policy (GZU)
Abstract: Government debt is an indirect debt of the taxpayers, and can be classified as internal or external.
Debt crisis is the general term for a proliferation of massive public debt relative to tax revenues.Public debt
enables governments to invest in critical areas of the economy where the capacity of tax revenue to undertake
these projects may be limited or in situations where printing additional money will disrupt the stability of the
economy. Government borrows in order defer difficult but necessary reforms such as the imposition of taxes
which might be necessary to generate revenue for development. Countries with high public debt tend to grow
slowly. The study examines the origin of debt crisis in Zimbabwe, debt nature, causes, consequences and
possible ways of reducing the debt. The study uses 1980-2013 data to run an OLS model on economic growth
using STATA Econometric Software, in an effort to explore the effect of external debt. The regression results
shows that public debt has a negative effect on economic growth in Zimbabwe, which has varying theories
prevailing. The study concludes by encouraging the government not to borrow unnecessarily, and to use
borrowed funds for investment projects, rather than on consumption expenditure.
Key words:Public debt, Economic Growth, Budget Deficit, GDP, Debt Crisis
JEL Classification:H63, O40, E62, E43
I. Introduction
Do high levels of public debt reduce economic growth? This is an important policy question.Most
policymakers do seem to think that debt reduces growth. Correlation, however, does not imply causation. The
link between debt and growth could be driven by the fact that it is low economic growth that leads to high levels
of public debt (Krugman 2010). According to Panizza and Presbitero (2012), it may be that slow growth causes
high debt. This implies that countries that are failing to grow end up borrowing more and usually they find it
hard to pay back the loan. However, as Furth (2013) indicated, when government debt grows, private investment
shrinks, lowering future growth and future wages. This typically work in many developing nations, and
Zimbabwe is not an exception.
Public debt is the debt owed by a central government. By contrast, the annual government deficit is the
difference between government receipts and spending in a single year, that is, the increase of debt over a
particular year, Arkoh (2013). For Zimbabwe, government debt rose considerably over the past two decades to
reach extremely high levels including recurring expenditure. As indicated by Checherita and Rother (2010), the
manner in which debt builds up can be important from the perspective of its economic impact, as well as of the
subsequent exit strategy.
Debt is not always bad. Sovereign debt can help developing countries. It enable governments to
facilitate growth take-offs by investing in a critical mass of infrastructural projects and social sectors of the
economy where taxation capacity may be limited, or when the alternative would be to print money and
compromise macroeconomic stability.Debt also facilitates tax smoothing and counter-cyclical fiscal policies,
essential for reducing output volatility; and it permits an equitable alignment of benefits and costs for long-
gestation projects by shifting taxation away from current generations (Gill and Pinto 2005). Reinhart and Rogoff
(2010) argue that war debts may be less problematic for future growth partly because the high war-time
government spending comes to a halt as peace returns, while peacetime debt explosions may persist for longer
periods of time.
Because debt plays such an integral part of economic progress, it must be measured appropriately to
convey the long-term impacts it presents, Troy (2015). Hence, public debt has important influence over the
economy both in the short run and the long run. According to Kumar and Woo (2010), the conventional view is
that debt (reflecting deficit financing) can stimulate aggregate demand and output in the short run (assuming no
non-Keynesian effects) , but crowds out capital and reduces output in the long run. However, as Troy (2015)
indicated, evaluating the country's national debt in relation to the country's gross domestic product (GDP) is not
the best approach.
2. Growth-Debt Nexus: An Examination of Public Debt Levels and Debt Crisis in Zimbabwe
DOI: 10.9790/5933-06230914 www.iosrjournals.org 10 | Page
This short paper seeks to explore the nature of public debt in Zimbabwe, debt history, debt growth,
debt effects, and solutions to reduce rising debt levels. Literature is scanty on the relationship between domestic
debt and economic growth with most researchers focusing on external debt, Putunoi and Mutuku (2013).As
indicated by Cecchettiet al. (2011), debt is a two-edged sword, if used wisely and in moderation, it clearly
improves welfare, but, when it is used imprudently and in excess, the result can be disaster. High and rising debt
for the Zimbabwean nation is a source of justifiable concern. The study contributes to the continuing debate of
the relationship between debt and economic growth, some studies indicate that external debt does not influence
economic growth, while others do think that high debt levels affect economic growth.
II. Economic Impact of Rising Public Debt
A sustainable government debt is one in which the debt ratio is stable or falling over time; a rising debt
ratio denotes unsustainability, Goldstein (2003). High public debt can adversely affect capital accumulation and
growth via higher long-term interest rates (Gale and Orzag, 2003; Baldacci and Kumar, 2010), higher future
distortionary taxation (Barro, 1979; Dotsey, 1994), inflation (Sargent and Wallace 1981; Barro 1995; Cochrane
2010), and greater uncertainty about prospects and policies. High debt is also likely to constrain the scope for
countercyclical fiscal policies, which may result in higher volatility and further lower growth. In more extreme
cases of a debt crisis, by triggering a banking or currency crisis, these effects can be magnified (Burnside et al.,
2001; Hemming et al., 2003).
Steeply rising public debt levels and the uncertainty associated with future fiscal consolidation plans
pose challenges for monetary policymakers. Deteriorating public finances can trigger a sudden increase in long-
term inflation expectations, Cecchettiet al. (2010). Also uncertainty about the timing and extent of fiscal
consolidation plans complicates the forecasting needed to set policy interest rates at their appropriate level.
Conflicts between the goals of fiscal and monetary authorities also arises causing inflationary outbursts in
emerging market economies.1
History shows that countries that ran high public debts eventually ended up with
high inflation because governments were unwilling to pay high interest rates.
III. Debt Statistics in Zimbabwe
Zimbabwe recorded a Government Debt to GDP of 49 percent of the country's Gross Domestic Product
in 2012. Government Debt to GDP in Zimbabwe averaged 78.41 percent from 1990 until 2012, reaching an all-
time high of 150.90 percent in 2011 and a record low of 48.44 percent in 1990. Government Debt to GDP in
Zimbabwe is reported by the Reserve Bank of Zimbabwe.Zimbabwe’s debt overhang is an impediment to the
growth trajectory. By end-2011, invalidated external debt stock (including arrears) was estimated at US$10.7
billion, representing 113.5% of the country’s Gross Domestic Product of which 67% is arrears. The bulk of the
debt is owed to bilateral creditors amounting to US$3.3 billion (or 31% of total debt stock), followed by
multilateral creditors at US$2.8 billion (26%), other debt at US$2.5 billion (23%) and private debt at US$2.1
billion (19%).
Year 2004 2005 2006 2007 2008 2009 2010 2011
Debt% of
GDP
52.3 109.8 108.4 218.2 259.4 282.6 149 220.1
The statistics indicate a crisis, the debt is too high and gives so much pressure to the fiscus. It only
shows that Zimbabwe is in a state of not being able to service the debt. This has also been fuelled by the
economic crisis that has seen Zimbabwe losing its sovereignty currency and adopt the multicurrency regime.
Surely the economy cannot fully recover given such levels of debt. Effective policies on debt have to be brought
to use. And a new way of accumulating debt should be designed. As also indicated by Hodge (2004) referring to
ECCU situation (here likened to Zimbabwe situation), clearly the high debt to GDP ratios in the region presents
a clearcase for fiscal adjustment but the approach must be nuanced to the extent that the baby is notthrown out
with the bath water.
3.1 Origin of Zimbabwe Public Debt
At independence in 1980, Zimbabwe inherited US$700 million of debt from the Rhodesian
government; the result of UN sanction-busting loans to the white regime to buy arms during the civil war, Jones
(2011). This inherited, unjust debt was short-term and high interest; imposing a large repayment burden in the
early 1980s just as drought struck. This debt dates primarily from loans made in the 1980s and 1990s by private
lenders such as banks; foreign governments such as France, Germany and the UK; and multilateral institutions
like the World Bank, African Development Bank and International Monetary Fund (IMF). The most expensive
1
For example Brazilian inflationary boom in the early 1980s when monetary policy, in the face of persistent fiscal deficits, started to act
more aggressively against inflation (Loyo (1999)); the large jump in Israeli inflation in October 1983 (Sargent and Zeira (2008)); and the
Indian inflation of the 1970s and 1980s in which fiscal deficits were monetised (Rangarajan and Mohanty (1997)).
3. Growth-Debt Nexus: An Examination of Public Debt Levels and Debt Crisis in Zimbabwe
DOI: 10.9790/5933-06230914 www.iosrjournals.org 11 | Page
project in the 1980s was the development of Hwange power station, funded by lenders including the World
Bank, European Investment Bank and UK government; tied to the use of British companies.Among these are the
US $ 400 million package from China for the extension of the Kariba South Power Station; the US$15 billion
per year WB’s Infrastructure Recovery Asset Platform; the US$500 million Rapid Social Response Program;
the US$500 million Micro Finance Enhancement facility; and the US$10 billion Infrastructure Crisis Facility.
3.2 Causes of Debt Accumulation
A lot of factors can be sighted as a cause for increasing debt in Zimbabwe, and these include both
political and economic factors. Budgetary indiscipline and poor debt management are the chief causes of the
current debt crisis in Zimbabwe and many other developing countries world over, Saungweme and
Mufandaedza (2013). Irresponsible over-lending by private and official creditors during the commodity
boom of the 1970s, without which irresponsible over-borrowing by African governments could not possibly
have occurred also contributed to the commonly known as African debt.Failure to implement ESAP is also a
significant cause. Neither the market reforms, nor the different measures that were meant to offset their effects
on the most vulnerable, went according to plan. At the same time as parts of the Zimbabwean private sector
displayed worrying signs of deindustrialization, and the public debt spiraled upwards, the standard of living of
most Zimbabweans was also plummeting to levels not seen in 25 years.
Natural disasters also played a role in worsening debt levels. In 1983, 1985 and 1992, the country
experienced severe droughts which forced government to commit resources to drought mitigation measures thus
further worsening the country’s fiscal and debt position. The participation from 1998 to 2002 in the war in the
Democratic Republic of the Congo set the stage for this deterioration by draining the country of hundreds of
millions of dollars. In 1997 there was a decision by government to award large unbudgeted pensions to the war
veterans, which worsened the situation. Also for the period 1999 and beyond the decline in economic
performance led to accumulation of arrears and penalties. In 1999 Zimbabwe defaulted in paying foreign debts
and failed to reschedule the IMF debt and the economy was forced to pay 150 million pounds. Disturbed
agriculture through the land reform program in 2000, has also a significant share in rising debt levels.
IV. Model Specification and Estimation
The study will analyse the relationship between economic growth and external debt of the economy.
The methodology used is this study is related to the study of Dereje (2013) who studied the “effect of external
debt on economic growth.” Though Dereje (2013) used panel data analysis on different nations, this study will
utilize the variables (debt interest burden added) and apply time series analysis on a single nation, Zimbabwe.
The variables affecting economic growth are derived from the Solow growth model. Data used in this study is
obtained from World Bank and IMF databases, and such data is mainly fit for international comparisons.
The study will regress economic growth against variables like population growth, external debt,
investment growth, totalexternal debt service, debt service to export ratio, debt interest payment, GDP growth
and trade balance. The study uses the STATA Econometrics software to analyse data. Due to the aim of the
study, the regression equation consists of debt burden measuring variables as the majority variables. The
specific model will be as follows;
tDbtExpDebtSvsInterestInvestInitGDPExtdebtTradebalPopEconGrowth 87654321
Where; EconGrowth = Economic Growth measured as growth in GNI per capita, Pop = Population
growth, measured by the logarithmic of population, Tradebal = Trade balance, exports less imports, Extdebt =
External debt levels,InitGDP = measures the initial GDP,Invest = Investment levels, Interest = Debt interest
payment, DebtSvs = Debt service payments, DbtExp = Debt service as a ratio of exports.
tand 81,
, constants and the error term.
3.3 Discussion of variables
Economic growth is the dependant variable in the analysis and represented by the growth rateof real
GDP per capita. Initial per capita GDP represent the log of real GDP per capita and is used to demonstrate
convergence. Convergence is a hypothesis that states: growth will be higher in countries where initial per capita
income is lower than countries where initial per capita incomeis higher, hence 1980 has been taken as a
base.Investment growth - according to Solow growth model investment has a positive and direct effect on
economicgrowth.Population growth rate is one of the main variables on the capital accumulation
equationdeveloped by Robert Solow. According to the equation, population growth rate reduces
capitalaccumulation. Trade balance/ net export - a countrywhich is in trade surplus doesn’t necessarily enjoy
economic growth and a country on tradedeficit doesn’t necessarily fail in terms of economic growth. The study
will expect a positiveeffect of trade balance on economic growth, regardless of the trade balance situation
thecountries experience. External debt - the disincentive effect of external debt on investment and growth,
4. Growth-Debt Nexus: An Examination of Public Debt Levels and Debt Crisis in Zimbabwe
DOI: 10.9790/5933-06230914 www.iosrjournals.org 12 | Page
whichis debt overhang, is considered as one of the major cause for the poor performance of manydeveloping
countries. Debt service export ratio - This is the case when indebted poorcountries transfer resources, including
foreign aid and foreign exchange resources to servicetheir accumulated debt. Net total debt service- The many
reason to include net total debt service in the econometrics model is totrap the effect of the debt relief the debt
they paid or serve. The study expects a negative impactof the net total debt service on economic growth.
3.4 Statistical Tests
Before estimation of the model basic statistical tests are undertaken and corrective measures to be
applied. Multicollinearity test will be done using the correlation matrix. Stationarity test will also be done using
Augmented Dick – Fuller test. And finally a heteroskedastic test will be done.
Variable ADF Statistic ADF Critical Values Conclusion
Econgrowth -5.453***
@1% = -3.696
@5% = -2.978
@10% = -2.620
Stationary, I(0)
Interest -2.089 Non-Stationary
Investment -3.318** Stationary, I(0)
External debt -2.218 Non-Stationary
Debtserv -1.832 Non-Stationary
InitGDP -1.090 @ 1% = -2.453
@ 5% = -1.696
@ 10% = -1.309
Non-Stationary
Popgrowth -7.882*** Stationary, I(0)
Tradebal -2.701*** Stationary, I(0)
DbtExp -1.333* Stationary, I(0)
Stationary: *** 1%, ** 5%, and * 10%.
The table above shows the results of a unit root test using ADF test statistic. Five variables including
the dependent variable are stationary [integrated of order zero, I(0)], while four are non- stationary. The study
uses the differencing method to stationarise the non-stationary variable to control for time effects. This involves
using the basic formula for the first difference;
.var,1 iablestationarynonisYwhereYYY ttt
Vaiable (First Difference) ADF test statistic ADF Critical Values Conclusion
INTEREST -5.629*** @1% = -2.457
@5% = -1.697
@10% = -1.310
Stationary, I(1)
EXTDEBT -6.061*** Stationary, I(1)
DEBTSERV -6.080*** Stationary, I(1)
INITGDP -4.938*** Stationary, I(1)
After differencing once, all the non-stationary variable became stationary, which means the variables
are integrated of order one, I(1). Hence the stationary series will be included in the regressions, having
eliminated the time effects.
Multicollinearity test has been done using the correlation matrix to test on the strength of relationships between
explanatory variables. The results are shown in the table below;
CORRELATION | invest~t tradebal debstexp logpop interest extdebt debtserv initgdp
investment | 1.0000
tradebal | -0.3779 1.0000
debstexp | 0.2627 0.0695 1.0000
logpop | 0.5061 -0.2346 -0.0908 1.0000
interest | 0.1888 -0.4247 -0.1076 -0.2734 1.0000
extdebt | 0.0113 -0.1857 -0.0001 -0.1212 0.2845 1.0000
debtserv | 0.4722 -0.4180 0.4380 -0.0679 0.1094 0.2125 1.0000
initgdp | -0.0804 0.1197 -0.1237 0.0899 -0.2154 -0.8499 -0.2457 1.000
The table shows that correlation between external debt variable and the initial GDP variable is -0.8499,
which is greater than the rule of thumb of 0.8. Hence both variables cannot be included in the same regression
equation, as biased results will be obtained. Since external debt is a major variable in the study, INITGDP
variable will be dropped. A variance inflation factor has also been computed for a regression equation
containing the correlated factors and a magnitude of 2.7 has been obtained, which is again less than 4 (rule of
thumb), implying that we cannot include both variable in a single equation.
3.5 Regression Model Results
Since the variables have been integrated of different orders, the appropriate model is to run an Ordinary
Least Squares model. The first regression was run, and eliminating highly insignificant variables, in this case
TRADEBAL (trade balance) which has a p-value of 0.748, another regression model was run to improve
efficiency of results. The final model yielded the following results;
5. Growth-Debt Nexus: An Examination of Public Debt Levels and Debt Crisis in Zimbabwe
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Regression Results, Economic Growth – Dependant variable (1980-2013)
F(6, 26) = 10.76 (0.0000), ADJ R-SQUARED = 0.6467, DW Statistic = 1.978506
3.6 Discussion of Results
A heteroskedasticity test was conducted after regression, using the Breusch Pagan test, and a chi-square
statistic of 0.24 (0.6235) was obtained. Hence we have rejected the null hypothesis of robust standard errors,
implying homoscedasticity prevails.The F-statistic reported 10.76 (0.0000) and is significant at 1% level
indicating that the model used in the study is correctly specified. An adjusted R-squared of 0.6467 shows that
about 65% variation in the dependant variable is explained by the included explanatory variables. Hence, it
shows that there are some variables that affect economic growth that have not been included in this study. A
Durbin-Watson statistic of 1.9785 shows that there is no serious autocorrelation as it is near to 2 (rule of thumb).
This gives the study worth importance and of value as the tests indicate no misspecification.
The regression model shows three significant variables, external debt variable at 1%, population
growth and investment level both at 10%. The fourth variable being the constant, also at 10%. The study has
shown that public debt affects economic growth negatively as the coefficient of EXTDEBT has a negative sign
and is significant at 1% level. Investment variable has a positive significant sign, indicating that investing is a
good way of raising economic growth, and this is consistent to growth theories. Population growth has a
negative significant sign, implying that the rate at which the population is growing, is affecting the growth of the
economy negatively. Hence, the economy is failing to cope with the growth of the population.
The study has failed to prove that debt interest payment has an effect on economic growth. The study
also has failed to prove statistically that the debt service to export ratio has an impact on economic growth. Also
the servicing of debt is not so influential on economic activities to the extent of affecting economic growth,
though the variable has a negative sign indicating a downward effect on growth.
Similar results have been obtained by Hodge (2004). The study results by Hodge (2004), demonstrated
that well-executed high-yielding public investment programs may have aconcomitant increase on the level of
economic output, boost private investment and consumption and most importantly not erode or lead to
unfavourable debt dynamics in the long run.Also a study by Presbitero (2005), pertaining to LICs estimated a
growth model, with a panel of 121 developing countries, and underlined the presence of a negative and linear
relationship between pastvalues of the NPV of external debt and current economic growth. Empirical study
results by Baum et al. (2012) suggest that the short-run impact of debt on GDPgrowth is positive and highly
statistically significant, but decreases to aroundzero and loses significance beyond public debt-to-GDP ratios of
around 67%; for high debt-to-GDP ratios (above 95%-[Zimbabwe statistics are in this range]),additional debt
has a negative impact on economic activity. Using annual data for the period 1984 to 2008 for a panel of
sixtydeveloping countries, a study by Qayyum and Haider (2012), found that good governance and foreign aid
affectthe economic growth positively while external debt has a negative impact on growth.
V. Concluding Remarks
An examination of the public debt leads to several important conclusions. Rising debt levels are not
favourable to a nation. Debt service isbecoming an increasing harsh constraint on government. External debt is a
burden that put aneconomy into trouble.The negative impact of this debt affects areas of criticalimportance in
the economic/social/political management and development of the nation. Large debts may discourage capital
accumulation and reduce economic growth, and large debts have significant financial and real consequences.
This could occur through higher long-term interest rates, higher future distortionary taxation, higher inflation,
greater uncertainty and macroeconomic volatility. If growth is indeed reduced, fiscal sustainability issues are
likely to be exacerbated, with further adverse consequences.It is essential that governments not be lulled into
complacency by the ease with which they have financed their deficits thus far.
There are various ways that have been suggested by literature to resolve debt problems especially for
African countries.2
However, Zimbabwe should mainly concentrate on internal measures to ease the debt
2
These include debt rescheduling, debt rolling, debt cancellation, Regional cooperation, re-instituting structural adjustment policies,
forgiveness asking, increasing foreign aid among others. For more debt solutions see Ndegwa Philip (2005),“Solution of Africa's External
Debt Crisis within a Framework of Recovery and Growth.”
VARIABLE COEFFICIENT STD ERROR P-VALUE
INVESTMENT 1.75652 .9017604 0.062 *
DEBTSEREXP 8.511934 7.312208 0.255
POPGROWTH -32.97132 16.11351 0.051 *
INTEREST 1.470787 1.550475 .352
EXTERNAL DEBT -.3842144 .0553311 0.000 ***
DEBT SERVICE -.5107073 .3641773 0.173
CONSTANT 229.3662 113.4071 0.054 *
6. Growth-Debt Nexus: An Examination of Public Debt Levels and Debt Crisis in Zimbabwe
DOI: 10.9790/5933-06230914 www.iosrjournals.org 14 | Page
problems. This involve effective monitoring of borrowed funds, investing in capital projects that generates
income. The nation should never borrow for consumption. There is need to have an approval committee,
whenever borrowing is to take place. This avoids misuse of funds and also ensures necessary borrowing.
Government spending should be monitored and also parastatal performance should be raised, and avoid
continuous capital injection by government to underperforming parastatals. There should be a framework of
harnessing the informal sector, so as to raise the tax base for government revenue.Adequate debt relief measures
are, therefore,necessary, and a matter of urgency.
Careful attention has to be paid to factors such as the efficiency of public investment, the government’s
willingness to make tough decisions regarding fiscal adjustment in addition to policiesregarding collection of
user fees for public investment and return on public investment. Of crucial importance is the institutional
framework for analyzing and managing public investment projects. This enables efficiency on borrowed funds
and hence increased capital creation.Edet-Nkpubre (2013), emphasised sovereign debt management practices,
and this is very crucial also for the Zimbabwean economy, and it also extends to other developing nations.Ojo
(1989), explained external debt management as a policy which seeks to alter the stock, composition, structure
and terms of debt with a view of maintaining at any given time, a sustainable level of debt service payment.
In conclusion, important to note is that borrowing is not all bad, but borrowed funds should not be
misused. Finance is one of the building blocks of modern society, spurring economies to grow. Without finance
and without debt, countries are poor and stay poor. When they can borrow and save, individuals can consume
even without current income. With debt, businesses can invest when their sales would otherwise not allow it.
And, when they are able to borrow, fiscal authorities can play their role in stabilising the macroeconomy. But,
history teaches us that borrowing can create vulnerabilities.Solving the existing external debt problem should
not, therefore,be regarded as the final objective; indeed solving that problem should be seenas one of the
necessary conditions for enabling Zimbabwe to absorb more externalresources for economic recovery and
growth.
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