Unconventional monetary policy and debt sustainability in Japan
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Fiscal sustainability
The rate of growth of public sector external debt obligations, and the nature of the debt contracted by the member countries of the Eastern Caribbean Central Bank over the last ten years signals the need for proper debt management policies and the maintenance of sustainable debt levels. Debt sustainability, by definition, refers to a country 's ability to service its debt obligations without contributing to fiscal imbalances in the economy. Fiscal imbalances are often manifested in the accumulation of arrears on external debt, and the need to resort to debt rescheduling and other forms of debt relief. This paper defines the concept of debt sustainability and assesses some of the factors that affect debt sustainability among the member countries of the Eastern Caribbean Central Bank. It outlines the level of external debt outstanding, debt repayments and the debt service arrears of these countries between 1988 and 1998. Further, the paper examines the level of concessional borrowing, interest rate variability and other indicators of debt sustainability and their impact on the macro economic accounts. The paper concludes with recommendations for the development of debt management strategies that will assist these countries in maintaining sustainable debt levels.
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Malaysia as one of the fast growing economy in the Southeast Asia region experienced challenging tasks in managing the increasing level of debts. This study intends to investigate the implication of the debt (domestic debt, external debt and household debt) towards economic growth of Malaysia by adopting Threshold regression method for sample period from 1980 to 2015. Empirical findings indicate that the threshold level for domestic debt is approximately 47% of GDP, 17% of GDP for external debt and 81% of GDP for household debt where there is a negative impact on growth the debt is above the threshold level.
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There is a growing concern on tremendous increase in external debt stock of Turkey. Especially, with global financial crises, the sustainability of external debt and allocation of external debt to productive investments becomes more and more important. Many researches have been done to examine external debt stock and economic growth relation. However, External debt stock has not been broken down into external private debt and external government debt, which might give different results since the power and causality direction of external private debt (EPD) and external government debt (EGD) could be different. The objective of this paper is to make an humble attempt to test “the external debt led economic growth” hypothesis by breaking down compositions of external debt into External Private Debt and External Government Debt, particularly for Turkey over the period 1998Q1-2016Q1. For our analysis, standard time series techniques are adopted. Our findings of empirical analysis tend to suggest that, there is a significant causal relationship between external private debt and Gross Domestic Product and that external private debt leads GDP. These findings are useful and have policy implications for the developing countries like Turkey in that at least in the short run until the debt threshold is reached, an external private debt might be helpful for enhancing GDP.
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This paper examines a complete profile of public debt structure for the past three decades in the context of the fiscal and external sector imbalances as the key determinants of public debt burden. Despite initiation of several reforms the stock of public debt, its growth and debt servicing remain to be high. Increase in debt is almost equally attributed to domestic and external debt and the structure of debt remain to be the same. Increased reliance on short term domestic debt from the central bank indicates the structure of debt is dominated by short-term debt. The rescheduling and restructuring of debt in the first half of 2000s had brought some relief in the external debt indicators. However, the rising fiscal and external accounts gap, in the second half of 2000s, has adversely affected the debt to GDP ratio and growth in external debt remains high. Obvious implication of growing debt stock is that the debt servicing cost would increase, fiscal adjustment would be difficult and debt sustainability indicators may deteriorate in the future.
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Since 2008 many countries suffer from weak economic growth performance which has been leading to sovereign debt crises in Eurozone periphery, USA, etc. The aim of this paper is to investigate effects of specific public debt categories on economic growth of advanced economies and based on econometric findings to conclude debt structure less harmful to growth. An empirical analysis employs panel data regression of OECD countries in period from 2000 to 2015. Public debt is divided into categories: original maturity of debt instruments, residency of creditors, currency of debt and sort of debt instrument. Main result is that the choice of public debt structure matters for growth. Although every significant debt category is detrimental to growth, the most negative impacts are of long-term debt instruments, debt in foreign currency, loans and credits, domestic debt.
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Public debt is a vital instrument for governments to fund public expenditure. This paper examined the public debt sustainability and economic growth in Nigeria using annual time series data from 1981 to 2021 and the generalized method of moments (GMM) technique. The variables used in the study include; Real GDP, external debt, domestic debt, debt servicing and government consumption. To capture the period the country was given debt relieve fund we used debt relief dummy. The effect of recession on the economy was captured using recession dummy. The empirical result showed that debt overhang exists with inverted U-shaped debt Laffer curve. The optimum public debt threshold range is 30% – 40% while the threshold benchmark is 36% for composite debt stock and 33% for external debt stock. Based on the findings, the paper recommends that Nigerian government should ensure optimal utilization of external debt to avoid crowding out of investments and also the existence of debt overhang.
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Public debt is the total amount covering the budget deficit in a certain period of time. The correct management of the debt structure means the set of operations carried out until the time when the debt is zeroed by issuing the debt and paying off the principal debt and interest thereafter. In this regard, in each state, a special institution responsible for the mentioned issues is involved. The purpose of debt strategy management is to ensure the achievement of the main economic and social goals by making certain adjustments or various additions to the amount, composition and repayment period of debts. From this point of view, debt management is closely related to both fiscal (budget-tax) and monetary policy of the state. Adjustments in the amount of debt, i.e. reducing or increasing the amount of the debt, regulating the debt in terms of duration is one of the important issues of debt management. It should be noted that these operations include adjustments to the amount and composition of the debt and a number of debt policy instruments that will ensure the achievement of certain economic goals. In addition, another goal of managing debt strategies is to use the resources obtained through borrowing in the most beneficial way for the stability and development of the national economy and to get rid of the debt burden at the lowest cost. This issue is one of the most important and most successful elements in the debt strategy. Public debt is the total value covering the budget deficit in a certain period of time. In addition, another goal of managing debt strategies is to use the resources obtained through borrowing in the most beneficial way for the stability and development of the national economy and to get rid of the debt burden at the lowest cost. This issue is one of the most important and most successful elements in the debt strategy. The most important factors that require attention in the debt strategy are: - Selection of the minimum debt burden for the State; - Sale of bonds and bills of any amount or as needed; - Adjustment of the borrowing amount and conditions to economic requirements; - Debt reduction as appropriate opportunities arise. Also, the main principle of strategic debt management is that the amount and structure of the public debt should be in accordance with the requirements of the economic situation and the main goals. At the same time, it should be taken into account that it is natural for the state to try to reduce its debt burden when appropriate opportunities arise. However, the policy of alleviating the debt burden begins first of all with the logical and correct selection of the borrowing time and other necessary measures. For example, during recessions when interest rates are low, it is more appropriate for the government to borrow. Because in general, the interest burden of the debt attracted by the state will be less. On the other hand, if there is a high interest payment obligation in the current period and if interest rates are likely to decrease in the future, it is useful to wait for the market interest to decrease through short-term borrowings. In the research paper “The main factors shaping the state's debt policy and debt strategy in the Republic of Azerbaijan” was talked about the debt policy, which is of special importance for any state and plays an indispensable role in its financial system. Nowadays, due to the fact that it plays an important role in the economic development of the country and the regulation of debt problems, the correct processing of the public debt has been reflected. Otherwise, an improperly prepared debt policy that does not take into account modern realities can lead to negative consequences and lead to unpleasant situations. From this point of view, the correct implementation of the policy related to the topic we are studying has been evaluated as one of the most relevant issues. In the article, the goals put forward in the strategy for public debt in the country are described. Based on the debt policy carried out in our country, it was brought to attention that the state has a wide and positive experience, both in terms of benefiting from the debt system and in terms of paying off the public debt. Recently, the dynamics of internal, general and external public debt have been given and statistical indicators have been shown, emphasizing the great importance of replacing foreign debt with domestic debt as much as possible. At the end of the article, it was mentioned that the main goal of the debt strategy is the gradual reduction of the public debt. Keywords: debt strategy, financial system, debt system, economic development, debt dynamics.
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European debt crisis attracted the attention and discussion of the worldwide practice and academia about the topic of economic growth mechanism of government debt,the difference the effects of government domestic debt and external debt on economic growth,the turning point of debt overhang that is a threshold at which the marginal effect of government debt on growth turns negative less than thirty years after Latin- American debt crisis.Based on discussion about the debt crisis of developed countries,this thesis investigates the reasonable government debt scale from perspective of doing regression about government debt and economic growth using dynamic panel data of OECD countries from 2000- 2009. The conclusions of this paper are reference and accordance to domestic empirical study about government debt scale and local government debt crisis prevention,OECD country's government debt scale controlling.
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To date, corporate debt structure research has focused largely on national debt markets characterized by both public and private debts supplies. However, given that most national debt markets are characterized by the absence of public debt supply, the representative debt market of Spain is used to extend the research on corporate debt structure. A double-hurdle test approach reveals that the likelihood of using bank debt is positively related to firm size and information availability but negatively related to firm credit worthiness, while the likelihood of using non-bank private debt is positively related to firm size, growth potential, relative firm size and degree of leverage. Further, it is found that the amount of bank debt firms hold is positively related to firm size, growth potential, information asymmetry, and age but negatively related to information availability. The amount of non-bank private debt is positively related to firm size but negatively to growth potential and age. Moreover, it is found that though some roles of private debt providers are similar in the two distinct national debt markets, some roles of public debt suppliers are supplanted by non-bank private debt suppliers in a debt market bereft of public debt supply.
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