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The nexus of private sector foreign debt, unemployment, trade openness: evidence from Australia.

Isaev, Mirolim and Masih, Mansur (2017): The nexus of private sector foreign debt, unemployment, trade openness: evidence from Australia.

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Abstract

There is little empirical evidence from the econometric analysis of the relationship between private sector’s foreign debt servicing and social development in open economies. This paper examines the relationship between private sector share of foreign debt, the unemployment rate and trade openness with Australia as a case study over the period 1988Q4-2016Q4. We employ Autoregressive Distributed Lag (ARDL) cointegration technique to explore the presence of theoretical long-run relationship among these variables. Our empirical findings indicate the presence of long-run equilibrium among variables. Moreover, the empirical results tend to reveal that the accumulation of private sector share of foreign debt is associated with the growth in Australia’s unemployment rate. We suggest for the policy makers that improvement of the private sector’s foreign debt is likely to reduce the unemployment rate.

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