Economic growth and external debt servicing: a cointegration analysis for the case of Sri Lanka.Abstract
In the immediate aftermath of the tsunami disaster, many of Sri Lanka's creditor nations granted debt write-offs and interest-free periods on loans to assist the reconstruction process. Two macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. effects stem from excessive external debt; a debt overhang Debt Overhang
A situation where the debt stock of a country exceeds the country's future capacity to repay it.
A debt overhang occurs when the cost of debt is combined with a fall in a country's trade and economic health. problem and a credit-rationing problem. Using econometric e·con·o·met·rics
n. (used with a sing. verb)
Application of mathematical and statistical techniques to economics in the study of problems, the analysis of data, and the development and testing of theories and models. analysis and Sri Lankan data for the period 1952 to 2002, this paper investigates whether Sri Lanka Sri Lanka (srē läng`kə) [Sinhalese,=resplendent land], formerly Ceylon, ancient Taprobane, officially Democratic Socialist Republic of Sri Lanka, island republic (2005 est. pop. faces a debt overhang problem. Long-run estimations rely on cointegration methodology whereas short-run analysis employs an error correction method. The results indicate that Sri Lanka does not have a debt overhang problem, probably because total external indebtedness is not too high.
JEL Classification: C22, F34, F43, H63
Keywords: Debt overhang; external debt; Sri Lanka, Cointegration
The 2004 Boxing Day tsunami disaster has prompted numerous creditor countries, including Canada, France, Germany, Japan, the United Kingdom and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , to grant external debt assistance to Sri Lanka to support the reconstruction of that devastated country. In general, this assistance has consisted of debt write-offs and interest-free periods on loans. These developments have rekindled interest in the question of external debt, especially in Sri Lanka and other highly indebted developing nations.
According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the World Bank, total external debt may be defined as debt owed to non-residents repayable in terms of foreign currency, food, or services. In terms of this definition, the total external debt of all developing countries has increased from US$411.4 billion to US$523.4 billion over the period 1990 to 2002 (World Development Indicators, 2004). This creates problems since whenever a country has accumulated a substantial debt, a significant proportion of public expenditure and foreign exchange earnings are absorbed by debt servicing, with heavy opportunity costs Opportunity costs
The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up. . Moreover, foreign debt may have a negative impact on investment through two conceptually distinctive effects: The debt overhang problem and the credit-rationing problem (Eduardo, 1989).
Debt overhang is said to occur when debt payments are linked to the economic growth of the country in question; part of the economic gains contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress"
contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent economic growth are expended on debt repayments. The debt overhang phenomenon is sometimes also referred to as a foreign tax on domestic production whereby foregone fore·gone
Past participle of forego1.
Having gone before; previous.
Usage Note: The word foregone has recently developed a new meaning as a truncation of the phrase investment accrues to foreign creditors. Consequently debt overhang may discourage governments from implementing growth-oriented economic policies. However, if an economy attains sufficiently high growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , then debt overhang may not be a serious problem because the returns on investment would be sufficiently high in any event (Lamont, 1995).
The credit rationing effect arises when a debtor nation is unable to repay its debt. In order to narrow the savings investment gap, so as to generate a greater surplus for debt repayment, the authorities in the country in question may increase interest rates that can, in turn, adversely affect new investment and thus subsequently depress de·press
1. To lower in spirits; deject.
2. To cause to drop or sink; lower.
3. To press down.
4. To lessen the activity or force of something. future growth prospects. It is, therefore, obvious that both the debt overhang problem and the credit rationing effect can impede investment in debtor nations and thereby reduce economic growth rates.
Pathberiya and Wijeweera (2005) have identified four distinct phases in the accumulation of external debt by Sri Lanka. Phase one began with Independence in 1948 with total foreign debt at only US$37.8 million and this remained virtually unchanged until 1968. Phase two tan from 1968 to 1977, and during this period the rate of growth in outstanding foreign debt rose slowly. However, between 1978 and 1995, total external debt increased rapidly from US$1,136 million in 1978 to US$9,405 million in 1995, largely as a result of massive public investment programs in agriculture and energy, as well as a significant depreciation of the Sri Lankan rupee The rupee (Sinhala: රුපියල , Tamil: ரூபாய்) is the currency of Sri Lanka, divided into 100 cents. The currency code is LKR. . In the final phase between 1996 and 2003, total foreign debt fluctuated considerably, falling until 2000 and thereafter rising to US$10.6 billion in 2003. In the light of these developments, this paper considers whether Sri Lanka has a debt overhang problem.
The paper itself is divided into main sections. Section 2 provides a synoptic syn·op·tic also syn·op·ti·cal
1. Of or constituting a synopsis; presenting a summary of the principal parts or a general view of the whole.
a. Taking the same point of view.
b. description of the theoretical approach to the question of debt servicing. Section 3 briefly describes the extant empirical literature on external debt serving and sketches the empirical contribution attempted in the present paper. Section 4 outlines data definitions and data sources as well as methodological considerations and the results obtained from the estimation procedures. The paper ends with some short concluding remarks in section 5.
II. THEORETICAL CONSIDERATIONS
Cunningham (1993) classified debt servicing as a primary factor of production and used the following standard production function model to investigate the relationship between economic growth and external debt.
Y = f (K, LF, DS) (1)
where Y, K, LF, and DS represent GNP GNP
See: Gross National Product , capital stock, the labour force and debt servicing respectively. Moreover, Cunningham (1993) argued that when a country is significantly indebted to foreigners, this adversely affects both capital and labour productivity. Moreover, domestic investors are deprived of any benefits arising as a consequence of increases in these factor productivities. Karagol (2002) extended the Cunningham model to incorporate Romer's (1996) conceptualisation (artificial intelligence) conceptualisation - The collection of objects, concepts and other entities that are assumed to exist in some area of interest and the relationships that hold among them. of human capital. With an additional human capital (H) variable, the new production function takes the following form:
Y = f(K, LF, DS, H) (2)
III. EMPIRICAL BACKGROUND
An embryonic empirical literature has been devoted to the empirical analysis of the debt overhang problem (1). For instance, Daniel Cohen Daniel Cohen may refer to:
(Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. concluded that more than half of this growth slowdown in the large debtor countries could be attributed directly to the debt crisis. In a more detailed paper, Deshpande (1997) tested the debt overhang hypothesis by means of an empirical examination of the investment experience of thirteen severely indebted countries. He established that in countries with debt overhang, external debt captured many of the effects of other explanatory variables that traditionally explained investment levels. In particular, Deshpande demonstrated that the relationship between external debt and investment during the 1980s was consistently negative for the sample countries.
Afxentiou and Serletis (1996) examined whether indebtedness has been detrimental to per capita income Noun 1. per capita income - the total national income divided by the number of people in the nation
income - the financial gain (earned or unearned) accruing over a given period of time growth in moderately and severely indebted countries. Using a Granger causality Granger causality is a technique for determining whether one time series is useful in forecasting another. Ordinarily, regressions reflect "mere" correlations, but Clive Granger, who won a Nobel Prize in Economics, argued that there is an interpretation of a set of tests as test they found no such causality causality, in philosophy, the relationship between cause and effect. A distinction is often made between a cause that produces something new (e.g., a moth from a caterpillar) and one that produces a change in an existing substance (e.g. in a sample of 55 developing countries. In a similar study, Afxentiou (1993) considered Granger causality between GNP growth and foreign indebtedness in a sample of middle income developing countries over the period 1971 to 1988. He found evidence for a strong debt overhang problem in several cases. Finally, Karagol (2002) used a vector error correction model to analyse the long-run relationship between foreign debt service payments and GNP. Employing the Johansen and Juselious (1990) maximum likelihood cointegration technique, he showed that a long-run relationship did exist in the Turkish economy.
The present paper seeks to add to this nascent literature using Engle and Granger cointegration analysis to examine the long run relationship between economic growth and external debt service payments for Sri Lanka. Although Karagol (2002) did investigate the long run relationship between debt servicing and other macro economic variables, he used a Vector Auto Regressive re·gres·sive
1. Having a tendency to return or to revert.
2. Characterized by regression.
re·gres representation, which considers all variables to be endogenous. By contrast, we argue that the Engle and Granger (1987) technique is more appropriate since it takes into account the theoretical background of the issue under analysis.
The approach adopted in this paper seeks to advance empirical understanding of the external debt problem in other respects as well. For example, only a few studies have investigated the relationship between external debt and growth; instead, most have focused on the relationship between investment and external debt. Secondly, the analysis presented here represents the first time series study using Sri Lankan data:
Sri Lanka is a particularly appropriate country to study because it has maintained a healthy growth rate while meeting massive external debt service payments during two decades of civil unrest. Thirdly, whereas lack of long-term data is the major reason for the limited use of time series analysis for many highly indebted countries, fortunately Sri Lanka has data that spans for five decades. Accordingly, we use a longer data set and better specification methods to estimate both long run and short-run growth elasticities for Sri Lanka over the period 1952-2002.
IV. DATA, METHODOLOGY AND RESULTS
Data Definitions and Data Sources
This study used annual data for the period 1952 to 2002. All the data were obtained from Central Bank of Sri Lanka's annual publications and IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). financial statistics. Monetary data is expressed exclusively in US$ millions whereas labour data is given units of a thousand. Gross National Product (GNP) is the dependent variable. Following Cunningham (1993) and Karagol (2002), GNP is determined by four factors of production; labour, human capital, capital and external debt service. We used fixed capital formation to control for the capital stock and population data in thousands to control for labour. Human capital was represented by annual education expenditure by the Sri Lankan government. External debt service payments include interest payments and repayments to foreign creditors. Summary statistics of variables are provided in Table 1.
Empirical Strategy and Results
The present study sought to investigate the relationship between GNP and debt servicing while controlling for other explanatory variables. The empirical analysis first explored whether a long-run relationship exited between economic growth and external debt payments. The analysis then focused on the short-run dynamics of the model. More specifically, it examined whether external debt service payments have any significant long run and short-run impacts on the rate of economic growth in Sri Lanka.
Standard practice in the time series literature obliges researchers to check for unit roots in each series before estimating any equation. If there is a unit root, then that particular series is considered to be non-stationary. Moreover, estimation based on non-stationary variables may lead to spurious results which produce high [R.sup.2] and t-statistics, but without any coherent economic meaning (Granger and Newbold, 1974). In accordance with standard practice, this study checked whether the variables are stationary.
The Augmented Dicky-Fuller (ADF (1) (Application Development Facility) An IBM programmer-oriented mainframe application generator that runs under IMS.
(2) (Automatic Document Feeder) A paper stacker that feeds one sheet of paper at a time into the unit. ) test for checking unit roots was employed in this study. Since the ADF unit root testing procedure is well established in the literature, its technical details are not considered further.
Three different specifications of ADF tests are available. The first excludes both the trend and the intercept. A second specification includes the intercept but excludes the trend term. The third specification includes both the trend term and the constant term. Following Harris (2003) we used the third specification throughout the analysis.
Selecting an appropriate lag length is extremely important in order to approximate the true data generating process. Too few lags mean that the residuals do not behave like a white-noise process while too many lags reduce the power of the test to reject the null of a unit root because more lags lead to loss of degrees of freedom (Enders, 2003). The Akaike Information Criterion Akaike's information criterion, developed by Hirotsugu Akaike under the name of "an information criterion" (AIC) in 1971 and proposed in Akaike (1974), is a measure of the goodness of fit of an estimated statistical model. It is grounded in the concept of entropy. was used to decide the optimal lag length. The outcome of this procedure indicated a unit root in each series in levels, but rejects the null of unit root in first differences. Hence these variables were considered as integrated of order one or I(1). Put differently Adv. 1. put differently - otherwise stated; "in other words, we are broke"
in other words , these variables are non-stationary. Accordingly, we cannot expect that the future behaviour of these variables would be the same as their current behaviour. This necessitated that we checked for the cointegration because a long-run equilibrium relationship could still exist in spite of a non-stationarity problem.
One of the most popular ways of testing for cointegration relationships is the Engle and Granger (1987) technique. Two estimation steps are required to carry out this test. First, the best possible linear equation is estimated and residuals are collected. Then a unit root test is used to test whether residuals are stationary. it they are stationary, then a long-run equilibrium relationship is said to exit. As the first step, we estimated the model using equation (1)
[GNP.sub.1] = [[beta].sub.0] + [[beta].sub.1] [DEBT.sub.t] + [4.summation summation n. the final argument of an attorney at the close of a trial in which he/she attempts to convince the judge and/or jury of the virtues of the client's case. (See: closing argument) over i = 2] [[beta].sub.i], [X.sub.t] + [[epsilon].sub.t] (1)
where GNP and DEBT denote gross national product and external debt service ratios respectively. X represents other the non-debt inputs (i.e. capital stock, labour and human capital) outlined earlier. A quadratic quadratic, mathematical expression of the second degree in one or more unknowns (see polynomial). The general quadratic in one unknown has the form ax2+bx+c, where a, b, and c are constants and x is the variable. trend term is added to control for the trend effects. In order to test whether GNP represents a long-run equilibrium relationship with the explanatory variables, we conducted an ADF test on residuals from the best possible linear relationship equation. Engle and Granger (1987) suggest an ADF test of the form given in equation (2).
[DELTA]e = [psi][e.sub.t-1] + [k.summation over (i=1)][[psi].sub.i] [DELTA][e.sub.t-i] + [mu] + [delta]t + [[zeta].sub.t] [[zeta].sub.t] ~ IID IID Imperial Irrigation District (California)
IID Interface Identifier (Component Object Model)
IID Ignition Interlock Device (automotive security system) (0, [[sigma].sup.2]) (2)
where et are the residuals from the cointegration equation and t is the time trend. However, in this step of the empirical analysis, we assumed that p and 8 are zero terms The number 0 is an important concept in mathematics. Zero module
In mathematics, the zero module is the module consisting of only the additive identity for the module's addition function. In the integers, this identity is zero, which gives the name zero module. because we had already included deterministic 1. (probability) deterministic - Describes a system whose time evolution can be predicted exactly.
2. (algorithm) deterministic - Describes an algorithm in which the correct next step depends only on the current state. components of constants and trend terms in the cointegration equation. Deterministic components can be added to either the long-run equation of error term equation, but not to both equations (Harris and Sollis, 2003). Results of the test are given in Table 2.
The Engle and Granger two-step methodology suggests several interesting outcomes. In the first place, the explanatory variables and GNP share a long-run relationship. Secondly, although the debt variable has the expected negative sign, it is not statistically significant, in contrast to studies that have found a significantly negative coefficient. As we have seen, a negative coefficient on the debt service variable has been defined as a debt overhang problem. For instance, in case of Turkey, Karagol (2002) found significantly negative coefficient, but very small debt servicing elasticity. In the present context, it can be argued that Sri Lanka has not yet reached the point where external debt inflicts detrimental long-term effects on economic growth. In general, if debt service ratio is greater than 50 per cent, then the possibility of debt overhang problem looms large. By contrast, the current debt service ratio in Sri Lanka has remained close to 20 per cent--well below the required rate for debt overhang problem. Moreover, the Sri Lankan debt service ratio has not only stayed relatively low compared to highly indebted countries, but has also diminished over the years. For example, debt service ratio decreased from 28.6 per cent in 1988 to 13.2 per cent in 2001. Despite the fact the present study has used external debt payments rather than the debt service ratio, we can still see a decrease in debt payments. By way of illustration, in 1999 total external debt service payments represented US$ 821 million, before falling to US$ 744 million by 2002.
Thirdly, there is a positive relationship between the capital variable and GNP, further implying a small multiplier effect. On this estimate a one dollar capital investment increases GNP by some US$1.15. This relationship is statistically significant at 10% level. Indeed, capital stock appears to be one of the most important determinants of GNP since it imparts the second largest positive effect on economic growth in Sri Lanka according to our estimates. This is perhaps best explained by noting that Sri Lanka is a labour abundant country and not a capital abundant country. Being a relatively capital scarce country, it is not surprising to see a substantial positive impact on economic growth by capital.
Fourthly, human capital and GNP is positively related at all reasonable significance levels. Indeed, of all the variables employed, human capital has the most substantial effect on GNP in the long run. In addition, human capital displays a significantly positive relationship with GNP while labour shows a negative relationship with GNP. This is a most interesting finding and requires some qualification. It can be argued that Sri Lanka is a labour abundant country with more than 20 million residents. More unskilled labour is thus unlikely to increase the level of output in the country since the economy cannot absorb an increased population at current low economic growth rates. Nevertheless, our results suggest that there may be scope for improvement in labour productivity by showing that a one dollar increase in education expenditure would increase GNP by approximately 10 dollars in the long run. The underlying explanation for this may be that although Sri Lanka is a relatively labour abundant country, labour productivity has remained very low. Accordingly, human capital spending capital spending
Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. can boost labour productivity and therefore make a big difference to GNP in the long run.
In terms of statistical procedure, we used a RESET test to check whether the regression specification was correct. This was necessary because we had not used double log specification which is common in the literature. RESET suggests that our specification is correct. We separately estimated elasticities for each variable and found that elasticities fluctuated dramatically over the data period, which suggested that the double log transformation is inappropriate (2).
One of the major arguments against the Engle and Granger methodology is it assumes a unique cointegration relationship without testing for this relationship. Although we have not reported the results, we have nonetheless tested whether there are more than single cointegration relationships using the Johansen and Juliesus (1990) maximum likelihood method. We have used trace statistic and maximum eigen value options available for this method and found that only one cointegration relationship exists.
The final step in the analysis involved estimating the short-run relationship between foreign debt service payments and GNP. The short-run model serves several important purposes. Firstly, it can be used to identify whether external debt effects are permanent or temporary. If responses are significant in the short run only, then impacts of changes in debt payments are temporary. On the other hand, if responses in both the long and short run are significant, then there will be both transitory and permanent effects. Second, the ECM (1) (Enterprise Change Management) See version control and configuration management.
(2) (Error Correcting Mode) A Group 3 fax capability that can test for errors within a row of pixels and request retransmission. procedure can be used to confirm the outcomes of the cointegration equation. According to the Granger Representation Theorem In mathematics, a representation theorem is a theorem that states that every abstract structure with certain properties is isomorphic to a concrete structure.
Once the existence of a long run model is established, it is easy to estimate the short run model by applying the standard E CM procedure. If [y.sub.t] and [Z.sub.t] are cointegrated (1,1), then the variables have ECM in the form given by equation (3).
[DELTA][y.sub.t] = [[alpha].sub.1] + [[alpha].sub.y][[??].sub.t-1] + [[alpha].sub.2][DELTA][z.sub.t], + [[epsilon].sub.t] (3)
All of the regressors, except the error correction term, are expressed in the first difference form. Error correction term is nothing more than a one-year lag residual obtained from the cointegration equation. X contains all the explanatory variables, which makes all of the terms in equation (3) stationary or integrated of order zero. Two steps were required by this investigation: The cointegration equation be estimated and the residuals are captured, whereas the second step estimated the error correction model as in equation (3).
The results are reported in Table 3. External debt service payments do not exert significant effect on GNP in the short run. Therefore, in case of Sri Lanka, external debt effects are neither permanent nor transitory. Short-run impacts of labour and human capital are statistically significant at 10 percent level, but size of these impacts is smaller than in the long run. This phenomenon is readily explicable ex·plic·a·ble
Possible to explain: explicable phenomena; explicable behavior.
ex·plic in the case of human capital--the Sri Lankan government obviously cannot expect a higher rate of economic growth immediately after they increase spending on education. However, capital does exert both short run and long run effects on economic growth. Nonetheless, as expected short-run impacts are smaller than the long-run effects.
Significant error correction term confirms our findings regarding the cointegration relationship. Testing the significance of the speed of adjustment coefficient is simply another way to show that the model converges towards a steady-state solution (Harris and Sollis, 2003). The coefficient of error correction term (ECM) suggests that if we insert a shock into the model through one of these variables, approximately 34 per cent of the deviation is corrected within the first year. This is a rather slow adjustment process.
Cointegration and error correction estimation results are valid only if the residuals of the equations are white noise. Several diagnostic tests can be used to determine whether results are robust. In this study, we employed standard structural break tests, autocorrelation Autocorrelation
The correlation of a variable with itself over successive time intervals. Sometimes called serial correlation. tests, and normality tests. Satisfactory performance in these tests serves to raise the level of reliability of the findings. Moreover, throughout the empirical analysis, we used the Newey West estimation procedure to ensure heteroskedasticity autocorrelation consistent errors. Results of these tests are not included, but they are available upon request from the authors.
This study sought to investigate the long run and short-run relationships between external debt and GNP for Sri Lanka over the period 1952 to 2002 in the context of the empirical literature on external indebtedness and economic performance. Some important conclusions emerged from the analysis. In the first place, external debt service payments are found to exert a negative, but nonetheless insignificant effect on GNP in the long run. Accordingly, we found no evidence of a debt overhang problem in case of Sri Lanka for the time period used. Moreover, we did not establish a significant short-run relationship between debt service payments and GNP.
As far as other explanatory variables are concerned, only capital exerted a significant positive effect on Sri Lankan economic growth in the long run and short run at a five per cent significance level. Human capital exerted a positive influence on growth in the long run at feasible levels of significance, but it was barely significant at ten per cent level in the short run. It would thus appear that Sri Lanka has already surpassed the optimal population that its resources can handle at current human capital levels. Indeed, labour imposed a negative effect on GNP in the long run and the short run.
A significant adjustment parameter confirms the long-run relationship that we obtained from the cointegration equation. Although debt service payments itself is not significant, explanatory variables jointly share a unique long-run relationship with the GNP. In addition, an estimate of the adjustment parameter suggests that a little more than 34 per cent of any deviation to the long-run equilibrium is corrected within a one-year period.
In sum, our results indicate that external debt has not been a major obstacle to Sri Lankan economic growth over the past 50 years. This is presumably pre·sum·a·ble
That can be presumed or taken for granted; reasonable as a supposition: presumable causes of the disaster. because Sri Lanka has not re ached a sufficiently high magnitude of external debt to induce a debt overhang problem. Against this background, it will be most interesting to observe the impact on Sri Lankan GNP of the debt write off provided by its leading creditors in the aftermath of the Tsunami disaster.
Afexentiou, P.C. and Serletis, A. (1996), "Growth and Foreign Indebtness in Developing Countries: An Empirical Study Using Long-Term Cross-Country Data", The Journal of Developing Areas, 31, 25-40.
Afxentiou, P. C. (1993), "GNP Growth and Foreign Indebtness in Middle-Income Developing Countries" International Economic Journal, 7 (3), 81-92.
Central Bank of Sri Lanka The Central Bank of Sri Lanka is the monetary authority of the country. It was established in 1950, i.e., two years after Independence. The founder Governor of the Central Bank of Sri Lanka was John Exter, while the Minister of Finance at the time was J.R. Jayawardena. , "Central Bank Annual Report", Colombo, various years.
Cohen, D. (1999), "The Sustainability of African Debt", The World Bank Policy Research Working Paper Series, 1621.
Cunningham, R.T. (1993), "The Effects of Debt Burden on Economic Growth in Heavily Indebted Nations", Journal of Economic Development, 18(1), 115-126.
Derado, D. (2002), "The State of External Equilibrium on Croatia and Its Long Term Stability", Management, 7(2), 77-100.
Deshpande, A. (1997), "The Debt Overhang and the Disincentive dis·in·cen·tive
Something that prevents or discourages action; a deterrent.
something that discourages someone from behaving or acting in a particular way
Noun 1. to Invest", Journal of Development Economics, 52(1), 169-87
Eduardo, B. (1989), "The Effect of External Debt on Investment", Finance & Development, 26(3), 17-19.
Enders, W. (2003), "Applied Econometrics Time Series", John Wiley John Wiley may refer to:
Engle, R. F. and Granger, C. W.J. (1987), "Cointegration and Error Correction: Representation, Estimation, and Testing", Econometrica, 55(2), 251-276
Granger, C.W.J. and Newbold, P. (1974), "Spurious Regression in Econometrics", Journal of Econometrics, 2(2), 111-120.
Harris, R. and Sollis, R. (2003), "Applied Time Series Modelling and Forecasting", John Wiley and Sons, Ltd., Chichester, England.
Johansen, S. and Juselius, K. (1990), "Maximum Likelihood Estimation and Inference on Cointegration, with Applications for the Demand for Money', Oxford Bulletin of Economics and Statistics, 52, 169-210.
Karagol, E. (2002), "The Causality Analysis of External Debt Service and GNP: The Case of Turkey", Central Bank Review 1, 39-64.
Lamont, O. (1995), "Corporate-Debt Overhang Overhang
Calculated as stock options granted, plus the remaining options to still be granted, and then divided by the total shares outstanding.
A high percentage for the overhang is usually a bad thing. and macroeconomic Expectations", American Economic Review, 85(5), 1106-17.
Pathberiya, P. and Wijeweera, A. (2005), "An Overview of the External Debt Situation in Sri Lanka", UNEAC Asia Papers, 9, pp 1-10.
Pattillo, C., Poirson, H. and Ricci L., (2004), "What Are the Channels Through Which External Debt Affects Growth?", IMF Working Paper, International Monetary Fund, WP/04/15.
Romer, D. (1996), Advanced Macroeconomics macroeconomics
Study of the entire economy in terms of the total amount of goods and services produced, total income earned, level of employment of productive resources, and general behaviour of prices. , McGraw-Hill.
ALBERT WIJEWEERA, BRIAN DOLLERY
University of New England, Australia The University of New England (UNE) is an Australian public university with approximately 18,000 higher education students. Its original and main campus is located in the city of Armidale in northern New South Wales.
University of Peradeniya , Sri Lanka The University of Peradeniya is a university in Sri Lanka. It is a renowned state university funded by the University Grants Commission of Sri Lanka.
(1.) Pattillo, Poirson and Ricci (2004) provide an excellent summary of both the theoretical and empirical literature on the question of external indebtedness and its effects.
(2.) Elasticity estimates ate available from the authors on request.
Table 1 Summary Statistics Variable Mean Median Maximum DEBT (US$ Millions) 229.594 127.842 821.141 CAPITAL (US$ Millions) 1160.591 479.579 4270.332 LABOUR (1000's) 13491.140 13701.200 18752.400 HUMAN CAPITAL (US$ Millions) 120.587 75.803 399.556 GNP (US$ Millions) 4948.249 2911.645 15077.590 Std. Variable Minimum Deviation DEBT (US$ Millions) 3.109 244.784 CAPITAL (US$ Millions) 90.947 1227.678 LABOUR (1000's) 7648.030 3415.141 HUMAN CAPITAL (US$ Millions) 21.877 98.581 GNP (US$ Millions) 945.789 4531.020 Table 2 Long Run Results Variable Coefficient t-statistic Constant * 3823.812 3.849 Debt -0.668 -0.449 Capital ** 1.147 1.682 Labour * -0.390 -3.295 Human Capital * 10.433 2.781 Trend^2 * 4.430 3.215 Note: * significant at 5% level. ** Significant at 10% level. Table 3 Short Run Results Variable Coefficient t-statistic Constant 452.076 1.916 Debt 0.233 0.207 Capital ** 1.081 1.864 Labout ** -3.129 -1.700 Human Capital ** 5.301 1.644 Error Correction ** Term -0.347 -1.821 Note: * significant at 5% level. ** Significant at 10% level.