| Abstrakt: |
The Central Bank of Somalia faces challenges in implementing effective monetary policies due to limited authority over the nation's monetary system and the incomplete development of the banking industry. This constraint may impede the bank's ability to regulate inflation effectively. Nevertheless, this paper investigates the asymmetric impacts of inflation on public debt sustainability in Somalia from 1977 to 2021. This research employs a Nonlinear Autoregression Distributed Lag (NARDL) model. The research explores how inflation impacts changes in public debt and uncovers potential nonlinearities or threshold effects within this dynamic association. Findings reveal asymmetric effects of inflation on public debt, indicating that inflation's increase positively influences public debt while its decrease adversely impacts it. Additionally, foreign direct investment exhibits a negative long-term correlation with inflation, and GDP shows a positive yet statistically insignificant connection with inflation in the long run. The study underscores the significance of prudent debt management practices and advocates caution when accumulating public debt, especially during periods of heightened inflation. Moreover, this study highlights the implications for governments in Somalia and similar economies facing analogous challenges. It emphasizes the importance of accounting for inflation's impact on public debt dynamics and advocates strategies to control inflation to mitigate the risks associated with rising public debt. The study supports the presence of asymmetrical effects between these variables, enriching theoretical frameworks. Despite, acknowledging limitations, such as temporal constraints and model assumptions, the study recommends future research employ more sophisticated methodologies, extend sequential scope, integrate qualitative approaches, explore policy interventions, and enhance data collection mechanisms for a more comprehensive analysis. Moreover, based on the study outcomes, policy recommendations proposed to enhance fiscal stability. These include implementing measures to curb inflation rates, prioritizing prudent debt management, strengthening fiscal responsibility, enhancing monetary policy's role in inflation management, diversifying investments, improving data monitoring, and focusing on long-term economic planning. [ABSTRACT FROM AUTHOR] |
