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Rivers State University, Port Harcourt.
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| Title: | Nigeria External Debt Profile And The Response Of The Nigeria Economy: A Normalised Johansen Equation And Error Correction Method Approach |
| Author(s): | IORTYER A. Dominic & ABU Maji |
| Abstract: | External debt is a constituent of Nigeria fiscal policy principally to raise funds from external oriented sources for budget financing. The external debt profile of Nigeria continued to accumulate amounting to billions of US dollars over the years, thus the paper examined the long run impact of the external debt components Viz, external debt stock, external debt servicing as debt burden and real exchange rate as component of economic openness on the response of the Nigeria economy proxied by real GDP. To achieve the objectives of short and long run impact, an econometric model of multiple linear regression and error correction mechanism form was specified. Modern econometric technique of unit test was conducted to determine the stationarily of the time series data. Optimal lag length criteria procedure for appropriate choice of lags using the Akaike information criteria. the Johansen cointegration equation was employed to determine the existence of long run relationship, and the normalized part of the Johansen equation establishes the long run impact of external debt stock, external debt servicing and the real exchange rate on the response of the Nigeria economy. The ECM estimation shows the short run impact of the independent variables on the dependent variable Finding from the estimated result revealed that, real exchange rate and external debt stock has positive long run impact on the response of the Nigeria economy, while debt servicing representing debt burden shows a negative long run impact on the response of the Nigeria economy. For the short run impact external debt stock shows a positive impact on the economy while other variables shows reverse impact. On the strength of the findings, the paper recommends for proper control of external debt funds to spur economic growth. by appropriately channeling to real sector of the economy. In addition flexible exchange rate be sustained. |
| Keywords: | debt overhang, debt burden, debt profile, debt laffer curve, crowding out hypothesis |
| Journal: | Economic and Social Science Review (ESR) |
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