Economic Growth and External Debt Servicing: A Cointegration Analysis for the Case of Sri Lanka

Title
Economic Growth and External Debt Servicing: A Cointegration Analysis for the Case of Sri Lanka
Publication Date
2007
Author(s)
Wijeweera, Albert
Dollery, Brian Edward
Pathberiya, Palitha
Type of document
Journal Article
Language
en
Entity Type
Publication
Publisher
Serials Publications
Place of publication
India
UNE publication id
une:4312
Abstract
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.
Link
Citation
Indian Journal of Economics & Business, 6(1), p. 93-102
ISSN
0972-5784
Start page
93
End page
102

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