Journal of Finance and Economics
ISSN (Print): 2328-7284 ISSN (Online): 2328-7276 Website: Editor-in-chief: Suman Banerjee
Open Access
Journal Browser
Journal of Finance and Economics. 2016, 4(4), 103-107
DOI: 10.12691/jfe-4-4-1
Open AccessArticle

Foreign Debt in EU Periphery, Roots and Remedies: A New Strategy

Nahid Kalbasi Anaraki1,

1School of Business & Technology Management, Northcentral University, San Diego, CA

Pub. Date: July 01, 2016

Cite this paper:
Nahid Kalbasi Anaraki. Foreign Debt in EU Periphery, Roots and Remedies: A New Strategy. Journal of Finance and Economics. 2016; 4(4):103-107. doi: 10.12691/jfe-4-4-1


This paper investigates the determinants of external debt in EU periphery. The goal is to contribute to the ongoing debate on the determinants of external debt and to subdue it by adopting the right policy reform. To answer this question the study implements a quantitative research methodology using econometric techniques with monetary, financial, fiscal, trade, and labor market policy variables with time-series data over the period of 1980 to 2013. The estimated econometric results with OLS technique suggest that while fiscal policy variables such as budget deficit and corporate tax rate are the most important factors in shaping external debt in Italy and Spain; monetary, financial, and trade policy variables are more important for Greece and Portugal. Interestingly, none of the labor market variables have a statistically significant impact on the foreign debt of EU peripheral countries. The policy implication is straight forward; contrary to what has been proposed by international institutions to reform the labor market, Greece and Portugal need to focus on trade and monetary policy reforms, while Italy and Spain should put more emphasis on fiscal policy reforms, particularly tax reform.

external debt fiscal policy financial development capital outflow corporate income tax rate openness trade policy reform

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Aiginger K. A new strategy for the European periphery, WIFO, Policy Paper No.1, 2013. Retrieved from
[2]  Tiruneh M. W. (n.d). An Empirical Investigation into Determinants of External Indebtedness, retrieved from
[3]  Lane, P.R. Empirical Perspective on Long Term External Debt, Trinity College Dublin and CEPR 2003, retrieved from
[4]  Saibu, M.O., & O.P. Abogan. Macroeconomics Determinants of External Debt Burden in Nigeria (1970-2004), Obafemi Awolowo University and Osun State College of Education, Nigeria.
[5]  Tiruneh M.W. Why Heavily Indebted Poor Countries Have Failed to Pay Their Debts? An Empirical Investigation, Czech Journal of Economics and Finance 55, 2005, retrieved from
[6]  Ngassam, C. Factors Affecting the External Debt Servicing Capacity of African Nation: An Empirical Investigation, Center for Economic Research on Africa, School of Business, Montclair State University, NJ, 2000. Retrieved from:
[7]  Udoka, C., & R. Anyingang. Relationship between External Debt Management Policies and Economic Growth in Nigeria (1970-2006), International Journal of Finance Research, Vol.1, No.1, Dec 2010. Retrieved from: Management_Policies_and_Economic_Growth_in_Nigeria_1970-2006.
[8]  Ioan G. Debt Burden in Romanian Economy, Macroeconomics and Monetary Economics, Cenomica, Audce, Vol. 9, No.6, 2013 retrieved from,%20No%206%20%282013%29.pdf.
[9]  Awan, R., A. Anjum, A., & S. Rahim. An Econometric Analysis of Determinants of External Debt in Pakistan, British Journal of Economic Management & Trade, 5(4) 2015 Retrieved from Debt_in_Pakis.
[10]  Benedict, I., I. L. Ehikioya & O. M. Asin. Determinants and Sustainability of External Debt in A Deregulated Economy: A Cointegration Analysis from Nigeria, American International Journal of Contemporary Research, Vol.4, No.6, June 2014. Retrieved from
[11]  Buch, C. & L. Lusinyan. Determinants of Short-Term Debt, Kiel Institute of World Economics, Working Paper No. 994, July 2000, retrieved from
[12]  Chiminya A.& E. Nicolaidou. An Empirical Investigation into the Determinants of External Debt in Sub Saharan Africa, School of Economics, University of Cape Town retrieved from
[13]  Hilsher, J. & Y. Nosbusch (2006). Determinants of Sovereign Risks: Macroeconomics Fundamentals and the Pricing of Sovereign Debt, Brandeis University and London School of Economics, retrieved from
[14]  Lane, P.R. Empirical Perspective on Long Term External Debt, Trinity College Dublin and CEPR, July 2003, retrieved from