EXTERNAL INDEBTNESS OF DIFFERENT NATIONS

EXTERNAL INDEBTNESS OF DIFFERENT NATIONS

Question one

The reason why the national figures of the countries that have been selected are given in terms of dollars is because the U.S. is the leading or foremost reserve currency. Hence, for the sake of standardization of national figures concerning external debt countries have to express their figures in terms of dollars (Berensmann, 2004). This allows easy comparison with other world economies without the need to carry out complex calculations on basis of exchange rates to make the comparisons (Chandrasekhar and Jayati, 2005).

Question two

Question three

The country indebtness figures are not a satisfactory way of determining the extent of a country’s debt because the ability to pay not considered in such figures. This is mainly because if a country has the potential to easily pay back its debt, then it is then no considered a significant debt compared to the countries with lesser debts but not able to easily pay back (Berensmann, 2004).  However, the most effective method is to express the extent of country’s debt in terms of a country’s national external debt as a percentage of the GDP (Chandrasekhar and Jayati, 2005).

Question four

The figures of external Debt as a Percentage of Gross Domestic Product (GDP) % as the alternative and best way of representing the extent of a country debt are shown in the table below:

The figures of the national external debts as a percentage of the countries Gross Domestic Products (GDP) are shown in the figure below:

Question five

Using unemployment rates to compare the problems of external debt, it is undoubtedly evident that there no outright relationship between the rate of employment and external debt. This is a contradictory finding, but possible (Chandrasekhar and Jayati, 2005). This is mainly because different countries have different labour force policies which mean irrespective of varying extents of external debts between countries there is also an expected variation in unemployment rates.

Question six

The unemployment rates among the 8 countries considered are as shown below:

Source: World Fact Book

Question seven

The scatter diagram of the new figures as shown in the above table is shown below:

Question eight

The relationship between the figures of the external debts as a percentage of Gross Domestic Product GDP) of the 8 countries considered are shown in the figure below which present an outcome of the relational scatter diagram as a way of analysing data in Ms Excel.

References

IMF External Debt Statistics. Guide for Compilers and Users”, IMF, 2003.

Bivens, L.J. (2004). “US external debt obligations”. Debt and the dollar. Economic Policy Institute.

Berensmann, K. (2004). “How to ensure debt sustainability beyond the HIPC-Initiative?”, Informal hearings of civil society on financing for development, UN Headquarters.

Chandrasekhar, C.P. and Jayati, G. (2005).  “The Crisis of State Government Debt”, Macroscan.

The World Fact Book, Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html

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