External shocks and persistence of external debt in open vulnerable economies: The case of Africa

Stella Muhanji and Kalu Ojah

Economic Modelling, 2011, vol. 28, issue 4, 1615-1628

Abstract: We examine the extent to which two external shocks, the world interest rate shock and the commodity price shock, lead to external debt accumulation in Africa. We begin by estimating a dynamic stochastic general equilibrium model of external debt burden, and solve the linear equations using the quadratic method of undetermined coefficients. Consequently, we run simulations of 50 time periods. Our results show that both world commodity price and world interest rate shocks impact external debt accumulation in the majority of our sample African countries. Interestingly, world commodity price shocks lead to an increase in external debt while world interest rate shocks appear to discourage accumulation of external debt.

Keywords: World; interest; rates; shocks; World; commodity; price; shocks; DSGE; model; Business; cycles; External; debt (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999311000381
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:4:p:1615-1628

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().