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The external public debt in the Caribbean Community

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  • Greenidge, Kevin
  • Drakes, Lisa
  • Craigwell, Roland

Abstract

A notable build-up in the foreign debt stock of the Caribbean Community (CARICOM) has been observed in recent years. By employing recent developments in panel unit root and co-integration analysis, this paper finds the major contributing factors to be: the output gap, real effective exchange rate, exports, real interest rate and current deviation of government expenditure from its trend value. Scenario analyses suggest that the time periods required to achieve the benchmark foreign debt to GDP ratio of 30%, for some countries, are too long, given the assumed parameters, but greater fiscal effort or more output growth can shorten these periods considerably.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 3 (May)
Pages: 418-431

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Handle: RePEc:eee:jpolmo:v:32:y::i:3:p:418-431

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: External public debt CARICOM Panel data analysis;

References

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  1. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
  2. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  3. Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," NBER Working Papers 2610, National Bureau of Economic Research, Inc.
  4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
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  6. Ratna Sahay, 2005. "Stabilization, Debt, and Fiscal Policy in the Caribbean," IMF Working Papers 05/26, International Monetary Fund.
  7. Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June.
  8. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
  9. Jayaraman, T.K. & Lau, Evan, 2009. "Does external debt lead to economic growth in Pacific island countries," Journal of Policy Modeling, Elsevier, vol. 31(2), pages 272-288.
  10. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  11. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  12. Pastor, Manuel Jr., 1989. "Current account deficits and debt accumulation in Latin America: Debate and evidence," Journal of Development Economics, Elsevier, vol. 31(1), pages 77-97, July.
  13. Krueger, Anne O., 1987. "Origins of the developing countries' debt crisis : 1970 to 1982," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 165-187, October.
  14. Hercowitz, Zvi, 1986. "On the determination of the external debt: The case of Israel," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 315-334, September.
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Citations

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Cited by:
  1. Roland Craigwell & Allan Wright, 2011. "Foreign direct investment and corruption in developing economies: Evidence from linear and non-linear panel Granger causality tests," Economics Bulletin, AccessEcon, vol. 31(3), pages 2272-2283.
  2. Carl Grekou, 2014. "Revisiting the nexus between currency misalignments and growth in the CFA Zone," EconomiX Working Papers 2014-4, University of Paris West - Nanterre la Défense, EconomiX.
  3. Sèna Kimm Gnangnon, 2012. "Structural Vulnerability and Excessive Public Indebtedness in CFA Franc Zone Countries," Working Papers halshs-00749470, HAL.
  4. Sèna Kimm Gnangnon, 2012. "Does Structural Economic Vulnerability Matter for Public Indebtedness in Developing Countries?," Working Papers halshs-00749469, HAL.
  5. Gnangnon, Sèna Kimm, 2013. "Structural vulnerability and excessive public indebtedness in CFA Franc Zone countries," Economic Modelling, Elsevier, vol. 35(C), pages 816-832.

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