Macroeconomic Instability in Nigeria; Examining the Roles of External Debts

Adedokun Adebayo and Okorie Ukafor Ukafor
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Adedokun Adebayo: Department of Economics Obafemi Awolowo University, Nigeria
Okorie Ukafor Ukafor: Department of Economics Obafemi Awolowo University, Nigeria

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 5, 1098-1116

Abstract: This study investigates the effects of external debts on the index of macroeconomic instability, which incorporate multiple macroeconomic indicators in a single index, so as to present a more robust findings as against the studies in the literature which investigates the effects of debts on each of the macroeconomic variables on individual bases. After generating the single index of instability, the study employed the Autoregressive Distributed Lag (ARDL) for the analysing under four different models which interchange four different measures of external debts. The results show that external debt stock to GDP ratio exerts negative effects on macroeconomic instability in the short and long run. Debt-to-export ratio is not significant on macroeconomic instability both in the short and long run. It is also established that debt-to-revenue has negative and significant impact on macroeconomic instability in the short run, but not in the long-run. In contrast, the results show that debt service-to-revenue exerts a positive and significant effects on macroeconomic instability both in the short and long-run. This implies that increase in the proportion of revenues that are expended on debt servicing worsen macroeconomic instability in Nigeria both in the short and long run.

Date: 2024
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