IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/98627.html

Leaders’ Foreign Travel and Foreign Debt

Author

Listed:
  • Kodila-Tedika, Oasis
  • Khalifa, Sherif

Abstract

This paper examines the effect of foreign travel by the leader or the head of state to the United States on the ability of the country to attract foreign loans. The key difficulty in determining a causal effect is the issue of endogeneity. As much as the leader’s trips abroad may attract foreign loans, it is also possible that leaders are tempted to visit countries known to be major creditors. To deal with potential endogeneity, we introduce a novel instrumental variable for the number of leader’s trips. The instrument is urban distance defined as the gap between the level of urban development in the country of the leader relative to that in the United States. We conduct a 2SLS where the urban distance serves as a source of exogenous variation in leader’s trips. The estimation provides evidence of a statistically significant positive coefficient of leader’s trips. This result implies that these trips by the leaders signal to the creditors their commitment to use the borrowed funds properly and to repay these funds in due time. Our results are robust even after the inclusion of other control variable, using alternative samples, and accounting for the potential of instrument weakness.

Suggested Citation

  • Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "Leaders’ Foreign Travel and Foreign Debt," MPRA Paper 98627, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98627
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/98627/1/MPRA_paper_98627.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "Leaders’ Foreign Travel and Democracy," MPRA Paper 105601, University Library of Munich, Germany, revised 26 Jan 2021.
    2. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," The World Bank Economic Review, World Bank, vol. 20(3), pages 341-365.
    3. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "Leaders’ Foreign Travel and Foreign Investment Inflows," MPRA Paper 98625, University Library of Munich, Germany.
    4. Easterly, William, 2002. "How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief," World Development, Elsevier, vol. 30(10), pages 1677-1696, October.
    5. Joao Tovar Jalles, 2011. "The Impact Of Democracy And Corruption On The Debt-Growth Relationship In Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(4), pages 41-72, December.
    6. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, June.
    7. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "The Effect of Leader’s Visits on Foreign Aid," MPRA Paper 99368, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "The Effect of Leader’s Visits on Foreign Aid," MPRA Paper 99368, University Library of Munich, Germany.
    2. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "Leaders’ Foreign Travel and Foreign Investment Inflows," MPRA Paper 98625, University Library of Munich, Germany.
    3. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "The Effect of U.S. Officials’ Visits on Conflict," MPRA Paper 98909, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "The Effect of U.S. Officials’ Visits on Conflict," MPRA Paper 98909, University Library of Munich, Germany.
    2. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "Leaders’ Foreign Travel and Foreign Investment Inflows," MPRA Paper 98625, University Library of Munich, Germany.
    3. Marchesi, Silvia & Missale, Alessandro, 2013. "Did High Debts Distort Loan and Grant Allocation to IDA Countries?," World Development, Elsevier, vol. 44(C), pages 44-62.
    4. Sanford, Jonathan E., 2004. "IDA Grants and HIPC Debt Cancellation: Their Effectiveness and Impact on IDA Resources," World Development, Elsevier, vol. 32(9), pages 1579-1607, September.
    5. Guido Tubaldi, 2018. "The HIPC initiative and its impact on health and education expenditures," Global Politics Review, Global Politics Review, vol. 4(1), pages 6-30, October.
    6. Kodila-Tedika, Oasis & Khalifa, Sherif, 2020. "The Effect of Leader’s Visits on Foreign Aid," MPRA Paper 99368, University Library of Munich, Germany.
    7. Marc Raffinot & Baptiste Venet, 2013. "Low Income Countries, Credit Rationing and Debt Relief: Bye bye international financial market?," Working Papers DT/2013/03, DIAL (Développement, Institutions et Mondialisation).
    8. Alina-Georgeta AILINCA, 2018. "Suggesting Some Indicators For A Better Measurement Of Public Debt Sustainability," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 3(3), pages 213-222.
    9. Maxime TERRIEUX & Benoît Jonveaux & Marin Ferry (Université Gustave Eiffel, DIAL), 2021. "Debt sustainability in Africa: state of play and future challenges," Working Paper 5b1b8e30-4a94-42f3-9e4b-9, Agence française de développement.
    10. Ugo Panizza, 2008. "The External Debt Contentious Six Years after the Monterrey Consensus," G-24 Discussion Papers 51, United Nations Conference on Trade and Development.
    11. Maxime TERRIEUX & Benoît Jonveaux & Marin Ferry (Université Gustave Eiffel, DIAL), 2021. "La soutenabilité des dettes en Afrique : état des lieux et enjeux futurs," Working Paper 5b1b8e30-4a94-42f3-9e4b-9, Agence française de développement.
    12. Anikó Bíró, 2013. "Subjective mortality hazard shocks and the adjustment of consumption expenditures," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1379-1408, October.
    13. Joshua C. Hall, Serkan Karadas and Minh Tam T. Schlosky, 2018. "Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(3), pages 1-24, September.
    14. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    15. Tae Ho Eom & William Duncombe & Phuong Nguyen-Hoang & John Yinger, 2014. "The Unintended Consequences of Property Tax Relief: New York’s STAR Program," Education Finance and Policy, MIT Press, vol. 9(4), pages 446-480, October.
    16. Frölich, Markus & Lechner, Michael, 2010. "Exploiting Regional Treatment Intensity for the Evaluation of Labor Market Policies," Journal of the American Statistical Association, American Statistical Association, vol. 105(491), pages 1014-1029.
    17. Honda, Jiro & Tapsoba, René & Issifou, Ismael, 2022. "When do we repair the roof? Insights from responses to fiscal crisis early warning signals," International Economics, Elsevier, vol. 172(C), pages 349-367.
    18. Pettersson, Jan, 2003. "Democracy, Consolidation and Growth," Research Papers in Economics 2002:16, Stockholm University, Department of Economics, revised 15 Dec 2004.
    19. Chukwuebuka Bernard Azolibe, 2021. "Determinants of External Indebtedness in Heavily Indebted Poor Countries: What Macroeconomic and Socio-Economic Factors Matter?," The American Economist, Sage Publications, vol. 66(2), pages 249-264, October.
    20. Ms. Annalisa Fedelino & Alina Kudina, 2003. "Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?," IMF Working Papers 2003/187, International Monetary Fund.

    More about this item

    Keywords

    ;
    ;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:98627. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.