Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches
Purpose – This study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants. Design/methodology/approach – The...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2023-09-01
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| Series: | Journal of Business and Socio-Economic Development |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JBSED-03-2023-0023/full/pdf |
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| author | Mesbah Fathy Sharaf Abdelhalem Mahmoud Shahen |
| author_facet | Mesbah Fathy Sharaf Abdelhalem Mahmoud Shahen |
| author_sort | Mesbah Fathy Sharaf |
| collection | DOAJ |
| description | Purpose – This study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants. Design/methodology/approach – The authors utilize an Auto Regressive Distributed Lag (ARDL) model to examine the symmetric impact of external debt on inflation, while the asymmetric impact is examined using a Nonlinear ARDL (NARDL) model. The existence of a long-run relationship between inflation and external debt is tested using the bounds-testing approach to cointegration, and a vector error-correction model is estimated to determine the short parameters of equilibrium dynamics. Findings – The linear ARDL model results show that external debt has no statistically significant impact on inflation in the long run. On the contrary, the results of the NARDL model show that positive and negative external debt shocks statistically affect inflation in the long run. The estimated long-run elasticity coefficients of the linear and nonlinear ARDL models reveal that the domestic money supply has a statistically significant positive impact on inflation. In contrast, the nominal effective exchange rate has a statistically significant negative impact on inflation. Practical implications – The reliance on symmetric analysis may not be sufficient to uncover the existence of a linkage between external debt and inflation. Proper external debt management is crucial to control inflation rates in Sudan. Originality/value – To date, no empirical study has assessed the external debt-inflation nexus and its potential asymmetry in Sudan, and the current study aims to fill this gap in the literature. |
| first_indexed | 2024-03-11T23:26:15Z |
| format | Article |
| id | doaj.art-06a11389b4234ef6a48d170e304ebc43 |
| institution | Directory Open Access Journal |
| issn | 2635-1374 2635-1692 |
| language | English |
| last_indexed | 2024-03-11T23:26:15Z |
| publishDate | 2023-09-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Journal of Business and Socio-Economic Development |
| spelling | doaj.art-06a11389b4234ef6a48d170e304ebc432023-09-20T11:52:20ZengEmerald PublishingJournal of Business and Socio-Economic Development2635-13742635-16922023-09-013429330710.1108/JBSED-03-2023-0023Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approachesMesbah Fathy Sharaf0Abdelhalem Mahmoud Shahen1Department of Economics, Faculty of Arts, University of Alberta, Edmonton, CanadaDepartment of Economics, Faculty of Economic Studies and Political Science, Alexandria University, Alexandria, EgyptPurpose – This study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants. Design/methodology/approach – The authors utilize an Auto Regressive Distributed Lag (ARDL) model to examine the symmetric impact of external debt on inflation, while the asymmetric impact is examined using a Nonlinear ARDL (NARDL) model. The existence of a long-run relationship between inflation and external debt is tested using the bounds-testing approach to cointegration, and a vector error-correction model is estimated to determine the short parameters of equilibrium dynamics. Findings – The linear ARDL model results show that external debt has no statistically significant impact on inflation in the long run. On the contrary, the results of the NARDL model show that positive and negative external debt shocks statistically affect inflation in the long run. The estimated long-run elasticity coefficients of the linear and nonlinear ARDL models reveal that the domestic money supply has a statistically significant positive impact on inflation. In contrast, the nominal effective exchange rate has a statistically significant negative impact on inflation. Practical implications – The reliance on symmetric analysis may not be sufficient to uncover the existence of a linkage between external debt and inflation. Proper external debt management is crucial to control inflation rates in Sudan. Originality/value – To date, no empirical study has assessed the external debt-inflation nexus and its potential asymmetry in Sudan, and the current study aims to fill this gap in the literature.https://www.emerald.com/insight/content/doi/10.1108/JBSED-03-2023-0023/full/pdfExternal debtExchange rateInflationMoney supplyNARDLSudan |
| spellingShingle | Mesbah Fathy Sharaf Abdelhalem Mahmoud Shahen Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches Journal of Business and Socio-Economic Development External debt Exchange rate Inflation Money supply NARDL Sudan |
| title | Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches |
| title_full | Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches |
| title_fullStr | Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches |
| title_full_unstemmed | Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches |
| title_short | Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches |
| title_sort | does external debt drive inflation in sudan evidence from symmetric and asymmetric ardl approaches |
| topic | External debt Exchange rate Inflation Money supply NARDL Sudan |
| url | https://www.emerald.com/insight/content/doi/10.1108/JBSED-03-2023-0023/full/pdf |
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