External Debt and Real Exchange Rate Volatility in South Asia

Md. Moazzam

South Asian Journal of Macroeconomics and Public Finance, 2023, vol. 12, issue 1, 83-110

Abstract: This study empirically examines the mechanism that connects debt accumulation to exchange rate volatility through the lens of important macroeconomic variables in South Asian Countries. One of the most influential explanatory factors behind exchange rate volatility is deemed as the flow of external debt for these countries. Using data from the World Development Indicators for the period 1980–2020, it is shown that external debt increases exchange rate volatility, significantly. The model is identified via panel Granger tests for relevant variables, estimated for a wide range of covariates and tested for all possible sources of endogeneity via subsequent robustness analyses. JEL Classification: C33, F31, H6, O53

Keywords: External debt; exchange rate volatility; Granger causality; panel data analysis; system GMM (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:smppub:v:12:y:2023:i:1:p:83-110

DOI: 10.1177/22779787221107711

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