International Economics

Permanent URI for this collection

http://etd.aau.edu.et/handle/12345678/170

Browse

Browsing International Economics by Author "Atinafu, G/Meskel (PhD)"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    External Debt Profile and its Sustainability: Evidence from East African Countries
    (Addis Ababa University, 2018-05) Tolasa, Alemayehu; Atinafu, G/Meskel (PhD)
    The aim of this paper is to empirically examine the sustainability of East African countries external debt over the period 2000-2016. For this purpose, this empirical analysis makes a use of various unit root test (i.e., univariate unit root test, panel unit root test and co-integration) test by taking the possibility of cross sectional dependence in to account. The intertemporal government budget constraint provides a test based on both stationarity and the cointegration relation between government revenues and expenditure including interest payments on external debt. Tests for stationarity and then cointegration between revenue and expenditure are based on recently developed panel data methods that offer increased power over existing time series techniques. Unlike existing panel studies on this topic, this study utilizes techniques that enable the examination of sustainability for individual panel members. The first stage of the investigation relies on a novel approach to unit root testing whereby tests for stationarity are conducted within a seemingly unrelated regression framework. The second stage involves the estimation of the long-run relationship between the revenue and expenditure by a range of recently developed panel data techniques advocated by Pedroni. Using a panel of nine EAC countries for the study period 2000-2016, the results from these techniques suggest that sustainability is present in four countries at most (Kenya, Eritrea, Sudan and Tanzania). These results confirmed with existing individual unit root and cointegration tests that indicate external sustainability for aforementioned countries. The study deduces that the external debt of EAC countries is unsustainable or weakly sustainable so they should exploit their domestic resources instead of going for the foreign resources and encourage saving and investment environment in their countries