Working Paper 355 - Public debt, Chinese loans and optimal exploration-extraction in Africa

Chuku Chuku, Lin Lang () and King Yoong Lim
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Lin Lang: School of Social Sciences, University of Manchester, https://www.socialsciences.manchester.ac.uk/

Working Paper Series from African Development Bank

Abstract: TBased on an optimal oil explorationextraction model with public debts and Chinese loans, we examine analytically and empirically two theoretical propositions pertaining to the impacts of public debt and Chinese loan on economic and physical scarcity/abundance in Africa economies. First, despite a baseline independent relationship between public debt level and optimal operations, the level of public debts in an economy can have an adverse effect on the abundance measures if it breached the debt-sustainability threshold. Second, with alternative Chinese loans, the effect on optimal exploration-extraction is analytically ambiguous. To examine both propositions, we estimate endogenous binary-treatment regression models based on a panel data of 18 African economies over 2000-17. We find empirical support with regards to the adverse effect of public debt sustainability. Further, we find positive effect from Chinese loans to both abundance measures, indicating that the combined marginal benefits outweigh the marginal costs associated with the resourcecollateralized funding nature of these loans.

Keywords: Africa; Chinese loans; Economic scarcity; Exploration and extraction; Non-renewable resources JEL classification: Q31; Q35; Q48 (search for similar items in EconPapers)
Date: 2021-10-12
New Economics Papers: this item is included in nep-afr, nep-ban, nep-dev and nep-fdg
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Journal Article: Public debt, Chinese loans and optimal exploration–extraction in Africa (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:adb:adbwps:2481

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