An Empirical Investigation into Long- and Short-Term Indebtedness

• Main Author: LEUNG, Hing-Man
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2001
• Subjects: Economics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/701; https://ink.library.smu.edu.sg/context/soe_research/article/1700/viewcontent/AnEmpiricalInvestigation.pdf
• Institution: Singapore Management University

The external debt position of a country often lies at the heart of her financial crisis. While it is well-known that indebtedness and in particular a surge in short-term debts often precipitate a debt crisis that is often made worse by runs on a country’s foreign exchange, the reasons why a country takes a particular debt position is rarely formally explained. This paper investigates the long-term determinants of international indebtedness, the time-rates of change of indebtedness, and a nation’s short- to long term debt ratio. The data set used is the World Data CD-ROM. Six potential explanatory variables are: size, per-cap GNP, growth rate, net-exports, change in reserves, and money supply. Cross-sectional regressions are run for each year from 1984 to 1993 to establish a pattern of answers to the indebtedness problem.