External debt in time of inflation in Egypt: a vector error correction model | ||||
| المجلة العلمية للدراسات والبحوث المالية والتجارية | ||||
| Article 23, Volume 4, Issue 1, January 2023, Page 661-701 PDF (1.94 MB) | ||||
| Document Type: المقالة الأصلية | ||||
| DOI: 10.21608/cfdj.2023.258059 | ||||
 View on SCiNiTO | ||||
| Author | ||||
| Sherine Boshra Ghaly | ||||
| أکاديمية السادات للعلوم الادارية، کلية الادارة | ||||
| Abstract | ||||
| Egypt's external debt has grown at a rapid pace. Meanwhile, higher indebtedness is related to rising inflation. Therefore, this study investigates the impact of Egypt's inflation on its external debt, as well as the interaction between these variables, notably the mutual impulse response. A “vector error correction model” (VECM) has been used to evaluate the variables of external debt stocks, final consumption expenditure, consumer price index, broad money, gross capital formation, and net trade in goods and services. Egypt's annual data has been used from 1976 to 2020. The results of the cointegration test using "Johansen's approach" show that cointegration occurs, confirming the adoption of the VECM technique. The major findings imply that inflation has a declining impact on external debt and a positive inflation shock initially reduces the external debt in the short and long term. Furthermore, the finding indicates a long-run equilibrium relationship between foreign debt and inflation, as well as bidirectional causality. | ||||
| Keywords | ||||
| External Debt; Inflation; Vector Error Correction Model; Final consumption expenditure; Gross capital formation; impulse response function | ||||
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