Optimal debt in Gabon
an analysis in term of foreign currency compositions
DOI:
https://doi.org/10.59051/joaf.v12i1.438Keywords:
Optimal public debt, foreign currency debt, TAR, exchange rate, public debt management.Abstract
Objective: The purpose of this paper is to verify the non-linearity between external debt and economic growth in Gabon.
Method: Taking the period 2000-2019, our analysis is based on the Threshold Autoregressive (TAR) model of Hansen (1999).
Results: The results show that the debt denominated in US dollars and that denominated in Euros stimulate economic growth in this country when they are respectively lower than the threshold of 52.31% and 34.76% of the GDP and become recessive on the activity beyond these thresholds.
Originality/Relevance: The paper analyzes the non-linearity between external debt and economic growth in Gabon by distinguishing specifically between debt denominated in US dollars and in Euros. It then looks at the currency composition of such debt in the context of a small economy open to the outside world.
Contribution: The results of the paper show that the government would benefit from favoring US dollar denominated debt as it gives more leeway in the debt strategy.
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