5.2.1.2
Interpretation of elasticity
5.2.1.2.1 Interpretation of long-term
elasticity or semi-elasticity
The results show that only the variables: exchange rate, GDP
per capita and devaluation are crucial in explaining Togo's debt. It appears
the following observations:
·The exchange rate is positively correlated with
Togo's debt. Togo's external debt is in foreign currencies. The exchange rate
affects significantly the country's external debt.
·The elasticity of long-term debt relating to
exchange rates (CFA/US Dollar) LTCH is 0.5668.In the long term, a 10%
appreciation of the average exchange rate of CFA/US dollar reduces the debt
service. Empirically, N'Diaye (1993) reached the same conclusion in a model of
debt in Senegal.
·The elasticity of imports / GDP ratio is 0.1809.In
other words a 10% reduction in imports would reduce the level of debt by 1.809%
in the long term. This result indicates that any policy to reduce debt
including a reduction of imports would be effective.
·In the long term, a 10% increase of the population
would lead to a reduction of the level of debt by 15.830%. This can be
explained by the breakdown of cooperation with EU. In fact, during that period,
Togo has not received new loans from its EU partners.
·The elasticity of long-term debt relating to GDP per
capita is -0.6046. GDP per capita (GDPPC)/ (PIBH) is negatively correlated with
Togo's debt. In the long term, while GDP per capita increases by 10%, then
external debt to GDP ratio will know any thing equal any way, a decrease of
6.046%. A strong GDP growth would be desirable to reduce significantly the
level of the country's debt.
·Demographic pressure tends to encourage a country's
indebtedness. The State is obliged to borrow to strengthen its financial
capacity to invest in sectors such as education, health, transport in order to
preserve social peace for an increasingly young population is demanding.
·However, most studies have shown that there is no
impact between population growth and economy growth. Barro (1990) emphasized
the exogenous feature of the population variable in the models of growth
integrated in the models of debt sustainability .This is justified by the
absence of a significant relationship between accumulation and population
growth.
·The dummy variable DUM94 that captures the effect
related the devaluation of the CFA franc against the French franc has a
positive coefficient (0.686178).
Devaluation significantly influences Togo's external debt at
5%.This result means that the devaluation has increased the country's external
debt. It is important to recall that Togo's external debt is contracted in
foreign currencies.
5.2.1.2.2 Interpretation of short-term
elasticity
· The elasticity of short-term debt to GDP ratio compared
to the exchange rate is 0.558390. Thus, in the short-term if the CFA franc
deprecates against the US dollar by 10%, then the total external debt measured
in US dollar related to GDP will increase by 5.58390%.
· A reduction in imports by 1% leads to a decrease in the
level of indebtedness by 0.297150% in the short-term. In other words, a
reduction of 10% in imposts would reduce the level of debt by 2.972% in the
short. This result indicates that any policy to reduce debt including a
reduction in imports would be efficient.
· In the short-term an increase of 10% of the population
leads to a reduction in the level of indebtedness by 10.1984%. This can be
explained by the breakdown of cooperation with the EU which has caused Togo not
to receive any new loans.
· In the short-term, an increase in GDP per capita of 10%
will cause a decrease in the level of Togo's debt by 7.80145%. The level of GDP
per capita is negatively correlated with the debt of Togo. Demographic pressure
tends to encourage the government debt to finance its expenses in education,
health and other, or to cope with natural disasters (fire, flood and
earthquake). On the other hand, a relatively high economic growth reduces
opportunities of debt, that is to say that macroeconomic performances tend to
limit, to some extent, the constraints of external capital requirements.
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