TITLE:
The Role of Currency Parity in the Relationship between Foreign Debt and Economic Growth in Sub-Saharan Africa
AUTHORS:
Kone Ibouanga, Symphorien Engone Mve
KEYWORDS:
Currency Parity, Foreign Debt, Economic Growth
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.5,
October
25,
2023
ABSTRACT: This article aims to understand to other neglected effects of foreign
debt by analyzing how difference in the utilization of currency parity between
sub-Saharan African (SSA) countries affects the relationship between external
debt and economic growth. In this work, SSA countries were subdivided into two
groups: the sample of the Former French colonies that use CFA franc, which is
link to the Euro through a fixed parity (FFCs) and the Former British Colonies
where each country uses his own
currency with a flexible regime exchange rate (FBCs). We use a dynamic growth
model with data from 11 countries of the FFCs and 15 countries of the FBCs
covering 2000 to 2016. We employed the Pooled Mean Group estimation technique
for both groups of countries, which is appropriated for drawing conclusions
from dynamic heterogeneous panels by considering long-run equilibrium
relations. The empirical evidence shows that external debt has a significant
negative effect on the economic growth of the FFCs, while having a significant
positive effect on the economic growth of the FBCs.