Does External Debt Drive Inflation in Sudan? Evidence from Symmetric and Asymmetric ARDL approaches

Mesbah Sharaf and Abdelhalem Shahen ()

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Purpose: This study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants. Design/methodology/approach: We utilize an Auto Regressive Distributed Lag (ARDL) model to examine the symmetric impact of external debt on inflation, while the asymmetric impact is examined using a nonlinear Auto Regressive Distributed Lag (NARDL) model. The existence of a long-run relationship between inflation and external debt is tested using the bounds-testing approach to cointegration, and a vector error-correction model is estimated to determine the short parameters of equilibrium dynamics. Findings: The linear ARDL model results show that external debt has no statistically significant impact on inflation in the long run. On the contrary, the results of the NARDL model show that positive and negative external debt shocks statistically impact inflation in the long run. The estimated long-run elasticity coefficients of both the linear and nonlinear ARDL models reveal that the domestic money supply has a statistically significant positive impact on inflation. In contrast, the nominal effective exchange rate has a statistically significant negative impact on inflation. Practical implications: The reliance on symmetric analysis may not be sufficient to uncover the existence of a linkage between external debt and inflation. Proper external debt management is crucial to control inflation rates in Sudan. Originality/Value: To date, no empirical study has assessed the external debt-inflation nexus and its potential asymmetry in Sudan, and the current study aims to fill this gap in the literature.

Keywords: External Debt; Exchange rate; Inflation; Money supply; NARDL; Sudan (search for similar items in EconPapers)
JEL-codes: E31 E52 F34 O24 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-afr, nep-ara, nep-des, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches (2023)
Journal Article: Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches (2023)
Working Paper: Does External Debt Drive Inflation in Sudan? Evidence from Symmetric and Asymmetric ARDL approaches (2023)
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:zbw:esprep:270641

Access Statistics for this paper

More papers in EconStor Preprints from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().