Determinants and Sustainability of External Debt: A Panel Data Analysis for Selected Islamic Countries

Waheed, Abdul and Abbas, Shujaat (2021): Determinants and Sustainability of External Debt: A Panel Data Analysis for Selected Islamic Countries.

Abstract

This study analyses the determinants and sustainability of external debt of selected Islamic countries. The study uses panel data of ten oil & gas exporting countries and nine oil & gas importing countries from 2004 to 2016. For oil & gas exporting Islamic countries, economic growth, central government revenue, FDI, and population have a negative effect on external debt, while central government expenditure, trade openness, inflation, and current account balance have a positive effect on external debt. For oil & gas importing Islamic countries, economic growth, central government revenue, current account balance, domestic investment, and labour force have a negative effect on external debt; whereas, FDI and foreign exchange reserve have a positive effect on external debt. The result of sustainability analysis shows that for many oil & gas importing Islamic countries, the actual debt is more than their expected debt based on their macroeconomic performance. For oil & gas exporting Islamic countries, the situation is not as alarming and their external debt position is still better, except few countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: External debt, Debt sustainability, Panel data, Oil & gas exporters, Oil & gas importers
• Subjects: F - International Economics > F1 - Trade; F - International Economics > F3 - International Finance; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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