Wijeweera, Albert

Dollery, Brian Edward

Pathberiya, Palitha

2007

In the immediate aftermath of the tsunami disaster, many of Sri Lanka's creditor nations granted debt write-offs and interest-free periods on loans to assist the reconstruction process. Two macroeconomic effects stem from excessive external debt; a debt overhang problem and a credit-rationing problem. Using econometric analysis and Sri Lankan data for the period 1952 to 2002, this paper investigates whether Sri Lanka faces a debt overhang problem. Long-run estimations rely on cointegration methodology whereas short-run analysis employs an error correction method. The results indicate that Sri Lanka does not have a debt overhang problem, probably because total external indebtedness is not too high.

Indian Journal of Economics & Business, 6(1), p. 93-102

0972-5784

https://hdl.handle.net/1959.11/4211

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