The objective of this paper is to analyze the
effects of oil shocks, interest rates and balance of payment on the sovereign
debt of member countries of the Central African Economic and Monetary Community
(CEMAC) from 1998 to 2018 using the nonlinear autoregressive distributed lag
(NARDL) method. The obtained results demonstrate short- and long-term
asymmetric relationships among oil shocks, interest rate, and balances of
payment on the sovereign debts of these countries. A positive long-term shock
increases sovereign debt, while debt
services deteriorate during negative short-term shocks, which
demonstrates the procyclical behavior of the debt of these countries. These
results enable us to formulate implications for economic policies to improve
budget management and diversify the economy.
References
[1]
Abdel-Latif, H., Osman, R. A., & Ahmed, H. (2018). Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia. Cogent Economics & Finance, 6, Article ID: 1512835. https://doi.org/10.1080/23322039.2018.1512835
[2]
Adedeji, A. N., Ahmed, F. F., & Muhammed, M. (2018). Empirical Evidence of Oil Price Shocks and Oil Economy Asymmetric Nexus: The Cases of Angola and Nigeria. Advances in Social Sciences Research Journal, 5, 17-32.
https://doi.org/10.14738/assrj.56.4649
[3]
Aguiar, M., & Amador, M. (2016). Sovereign Debt. In E. Helpman, K. S. Rogoff, & G. Gopinath (Eds.), Chapter 11 Handbook of International Economics (Vol. 4, pp. 647-687). Amsterdam: Elsevier. https://doi.org/10.1016/B978-0-444-54314-1.00011-2
[4]
Aguiar, M., & Gopinath, G. (2004). Defaultable Debt, Interest Rates and the Current Account. Journal of International Economics, 69, 64-83.
https://doi.org/10.1016/j.jinteco.2005.05.005
[5]
Allegret, J.-P., Couharde, C., Mignon, V., & Razafindrabe, T. (2015). Oil Currencies in the Face of Oil Shocks: What Can Be Learned from Time-Varying Specifications? CEPII Working Paper No. 18. https://doi.org/10.1080/00036846.2016.1226490
[6]
Arellano, C. (2008). Default Risk and Income Fluctuations in Emerging Economies. American Economic Review, 98, 690-712. https://doi.org/10.1257/aer.98.3.690
[7]
Ayessa, E. B. (2020). Diversification économique dans les pays membre de la CEMAC: Déterminants et Effets d’atténuation des chocs. Thesis, Université Marien NGOUABI.
[8]
Bernanke, B. S., Gertler, M., & Watson, M. (1997). Systematic Monetary Policy and the Effects of Oil Price Shocks. Brookings Papers on Economic Activity, 1, 91-142.
https://doi.org/10.2307/2534702
[9]
Blanchard, O. J., & Galí, J. (2008). The Macroeconomic Effects of Oil Price Shocks: Why Are the 2000s So Different from the 1970s? In J. Galí, & M. Gertler (Eds.), International Dimensions of Monetary Policy (pp. 1-77). Chicago, IL: University of Chicago Press.
https://doi.org/10.3386/w13368
[10]
Bruno, M., & Sachs, J. D. (1985). Economics of Worldwide Stagflation. Cambridge, MA: Harvard University Press.
[11]
Buetzer, S., Habib, M. M., & Stracca, L. (2012). Global Exchange Rate Configurations. Do Oil Shocks Matter? European Central Bank, Working Paper Series.
[12]
Bulow, J., & Rogoff, K. S. (1989). A Constant Recontracting Model of Sovereign Debt. Journal of Political Economy, 97, 155-178. https://doi.org/10.1086/261596
[13]
Bulow, J., & Rogoff, K. S. (1988). Sovereign Debt: Is to Forgive to Forget. American Economic Review, 79, 43-50. https://doi.org/10.3386/w2623
[14]
Denton, F. (1971). Adjustment of Monthly or Quarterly Series to Annual Totals: An Approach Based on Quadratic Minimization. Journal of the American Statistical Association, 66, 99-102. https://doi.org/10.1080/01621459.1971.10482227
[15]
Di Fonzo, T., & Marini, M. (2012). On the Extrapolation with the Denton Proportional Benchmarking Method. IMF Working Papers, 2012, 21.
https://doi.org/10.5089/9781475505177.001
[16]
Eaton, J., & Gersowitz, M. (1981). Debt with Potential Repudiation: Theoretical and Empirical Analysis. Review of Economic Studies, 48, 289-309.
https://doi.org/10.2307/2296886
[17]
Edelstein, P., & Kilian, L. (2007). Retail Energy Prices and Consumer Expenditures. Working Paper, Ann Arbor, MI: University of Michigan.
[18]
Flood, R. P., & Olivier, J. (2005). An Interest Rate Defense of a Fixed Exchange Rate? Journal of International Economics, 66, 471-484.
https://doi.org/10.1016/j.jinteco.2004.09.001
[19]
Frankel, J., & Rose, A. (1996). Currency Crises in Emerging Markets: An Empirical Treatment. Journal of International Economics, 41, 351-366.
https://doi.org/10.1016/S0022-1996(96)01441-9
[20]
Goldfajn, I., & Valdés, R. (1996). The Aftermath of Real Appreciations. NBER Working Paper No. 5650. https://doi.org/10.3386/w5650
[21]
Hamilton, J. D. (1996). This Is What Happened to the Oil Price-Macroeconomy Relationship. Journal of Monetary Economics, 38, 215-220.
https://doi.org/10.1016/S0304-3932(96)01282-2
[22]
Herrera, A. M., & Pesavento, E. (2007). Oil Price Shocks, Systematic Monetary Policy and the “Great Moderation”. Macroeconomic Dynamics, 13, 107-137.
https://doi.org/10.1017/S1365100508070454
[23]
Hooker, M. (1996). What Happened to the Oil Price-Macroeconomy Relationship? Journal of Monetary Economics, 38, 195-213.
https://doi.org/10.1016/S0304-3932(96)01281-0
[24]
Kaminsky, G. L. (2003). Varieties of Currencies Crises. NBER 10193.
https://doi.org/10.3386/w10193
[25]
Kilian, L. (2008). The Economic Effects of Energy Price Shocks. Journal of Economic Literature, 46, 871-909. https://doi.org/10.1257/jel.46.4.871
[26]
Kilian, L. (2009). Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market. American Economic Review, 99, 1053-1069.
https://doi.org/10.1257/aer.99.3.1053
[27]
Lahiri, A., & Végh, C. (2003). Delaying the Inevitable: Optimal Interest Rate Policy and BOP Crises. Journal of Political Economy, 111, 404-424.
https://doi.org/10.1086/367682
[28]
Mankiw, N. G., Romer, D., & Weil, D. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107, 407-437.
[29]
Pesaran, M. H., & Shin, Y. (1998). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Econometric Society Monographs, 31, 371-413.
https://doi.org/10.1017/CBO9781139052221.011
[30]
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289-326.
https://doi.org/10.1002/jae.616
[31]
Reinhart, C. M., & Rogoff, K. S. (2009). The Aftermath of Financial Crises. Working Paper 14656. http://www.nber.org/papers/w14656
https://doi.org/10.3386/w14656
[32]
Reinhart, C. M., Rogoff, K. S., & Savastano, M. A. (2003). Debt Intolerance. Brookings Papers on Economic Activity, 1, 1-74. https://doi.org/10.3386/w9908
[33]
Schorderet, Y. (2003). Asymmetric Cointegration. Working Paper, Geneva: Econometrics Department, University of Geneva. https://core.ac.uk/download/pdf/7134653.pdf
[34]
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. In Festschrift in Honor of Peter Schmidt (pp. 281-314). New York: Springer.
https://doi.org/10.1007/978-1-4899-8008-3_9
[35]
Tomz, M., & Wright (2007). Do Countries Default in Bad Times? Journal of the European Economics Association, 5, 352-360. https://doi.org/10.1162/jeea.2007.5.2-3.352
[36]
Tomz, M., & Wright, M. L. J. (2013). Empirical Research on Sovereign Debt and Default. nber/w18855. https://doi.org/10.3386/w18855
