7 Novembre 2016 - Séminaire du LED - William Nganga (Univ Strathmore Kenya & Univ paris 8) - Investigating the Effect of Macroeconomic Drivers on External Public Debt Dynamics in East Africa

Date de publication : 21 févr. 2017 12:49:49

Abstract: This study investigates the extent to which interaction of macroeconomic shocks exacerbates or mitigates external public debt dynamics among East African countries. Based on panel data consisting of annual time series from 1991 to 2014 from five East African countries, a panel vector Autoregression estimator (PVAR) by Pedroni, (2013) is used to evaluate how primary balance, real exchange rate, real interest rate and Gross Domestic Product growth interact with each other. The findings are threefold: (i) East African Countries (EAC) which include Kenya, Tanzania, Uganda, Rwanda and Burundi are debt-sustainable insofar as external debt improves productivity and growth; (ii) automatic stabilizers, particularly interest rate and exchange rate, are procyclical towards external debt; (iii) fiscal consolidation might be counterproductive as a response to debt management, as this may dampen Gross Domestic Product growth and ultimately compromise EAC’s ability to service debt.