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An Econometric Analysis Of Determinants Of Debt Sustainability In Ethiopia

Author

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  • ALEME, Timkete

    (Department of Economics, Mizan-Tepi University, Mizan Teferi, Ethiopia.)

Abstract

Sound and efficient external debt sustainability is an essential instrument to shred the notoriety of indebtedness and to ameliorate economic growth. This study was conducted with an objective to examine the determinants of foreign debt sustainability in Ethiopia using a yearly time series data that lasts from 1980 to 2016. A log-linear regression model was used, and the results demonstrate that debt service to GDP ratio and real effective exchange rate were statistically significant and positively associated with debt sustainability in Ethiopia. Whereas terms of trade and foreign real interest rate were found statistically significant and have a negative relationship with debt sustainability in Ethiopia. The growth rate of foreign GDP and fiscal position of government were statistically insignificant and have opposite signs to impact debt sustainability in Ethiopia. Hence, cautious domestic macroeconomic policies that will avoid overvaluing real effective exchange and deteriorating terms of trade should be designed and implemented.

Suggested Citation

  • ALEME, Timkete, 2019. "An Econometric Analysis Of Determinants Of Debt Sustainability In Ethiopia," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(1), pages 39-55, March.
    • Handle: RePEc:vls:finstu:v:23:y:2019:i:1:p:39-55
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    References listed on IDEAS

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    Cited by:

    1. Yabesh Ombwori Kongo & Elvis Kimani Kiano & Joash Ogolla Ogada & Peter Isaboke Omboto, 2023. "The Effect of Debt Service Ratio and Exchange Rate on Public Debt Sustainability in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 302-312, November.

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    More about this item

    Keywords

    external debt; debt management; economic growth; log-linear regression;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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