Exchange to Change Sept 2017 20170911 E2C zomer web - Page 4

IOB Alumni PhD … Vintage 2017 : Interview with Kelbesa Megersa
4 AT IOB

Alumni applause

IOB Alumni PhD … Vintage 2017 : Interview with Kelbesa Megersa

E2C : Can you give a short summary of your PhD thesis ?
KM : In the PhD , I present three main essays that discuss the problems of debt sustainability , financial crisis and the role of external monetary shocks to the stability of developing countries .
The first essay is based on the argument that an ‘ unsustainable ’ debt burden plays a negative role on the growth prospects of developing countries . I highlight the role of institutions and the way governments with divergent public sector management capacities may see a diverse nexus between public debt and economic growth . The data I used revealed that developing countries with better public sector management tend to experience the detrimental impacts of public debt at relatively higher levels , when compared to other developing countries with weaker public sector management quality . In the second essay , I used a ‘ signals ’ approach to investigate how the behavior of key macroeconomic variables can be used to predict currency crises in Ethiopia . I focus on three key periods of currency crisis in Ethiopia and define currency crisis episodes as extreme movements in the exchange market pressure index . In the final essay , I study problems linked to external financial shocks . I examine the spillovers ( unintended impacts ) of recent unconventional monetary policies of the US Fed and European Central Bank on developing countries . Specifically , I analyze the impact of these shocks on the returns ( dynamics ) of various South African assets . Since the impact of policy announcements on financial markets is often ‘ immediate ’, I use high frequency daily data . Each essay uses different quantitative research methodologies that are adapted to its research questions .
E2C : The main concerns of your research are sustainability of public debt , financial stability and strategies to cope with external shocks in developing countries . What policy recommendations or advice / lessons can you draw from your research regarding these issues ?
KM : The overall policy implication of the first essay is that the discussion on the negative effects of public debt in developing countries should pay attention to the issue of cross-country heterogeneity , particularly in terms of quality of institutions . Further , the chapter also draws attention to rising public debt levels in developing countries , in a period where the major focus has shifted to advanced countries which have historically much higher levels of debt to GDP . Even with the best intentions ( government loans to finance infrastructures that would serve as engines of growth ), rapidly rising public debt levels in developing countries should be a matter of concern . Borrowing too much ( beyond repayment capacities ) makes these countries susceptible to debt crises . The exercise in the second essay shows that financial ‘ early warning systems ’ can be useful instruments . They can notify policymakers when ‘ known anomalies ’ are seen in the economy that might potentially progress into a full-blown crisis . Further , having a tool based on multiple key macroeconomic variables and sectors often does a better ‘ early warning ’ job . However , given the fact that future crises may have different roots from previous ones and considering the mixed performance of such complex techniques ( e . g . failures to anticipate some past crises ), developing countries should not solely rely on these tools . Preferably , authorities should combine their own observations with forecasts of ‘ early warning systems ’. My third essay shows clear evidence of spillovers from the so-called
Exchange to change September 2017
4 AT I O B Alumni applause IOB Alumni PhD… Vintage 2017: Interview with Kelbesa Megersa E2C: Can you give a short summary of your PhD thesis ? KM: In the PhD, I present three main essays that discuss the problems of debt sustainability, financial crisis and the role of external monetary shocks to the stability of developing countries. The first essay is based on the argument that an ‘unsustainable’ debt burden plays a negative role on the growth prospects of developing countries. I highlight the role of institutions and the way governments with divergent public sector management capacities may see a diverse nexus between public debt and economic growth. The data I used revealed that developing countries with better public sector management tend to experience the detrimental impacts of public debt at relatively higher levels, when compared to other developing countries with weaker public sector management quality. In the second essay, I used a ‘signals’ approach to investigate how the behavior of key macroeconomic variables can be used to predict currency crises in Ethiopia. I focus on three key \[و\[Bܚ\\[][XH[Y[H\[Hܚ\\™\\\\^[YH[ݙ[Y[[B^[HX\]\\H[^ [H[[\^KHYH؛[\[YH[H[H\[X\ M^\[[[X[ˈH^[Z[BH[ݙ\ [[[Y[\XHقX[[۝[[ۘ[[ۙ]\HXY\›وHTY[]\X[[[[›ۈ][[[Y\ˈXYX[KB[[^HH[\Xو\HۂH]\ [[ZXHو\[\]YX[\]ˈ[HH[\XوXB[[[Y[ۈ[[X[X\]\›ٝ[8&[[YYX]x&KH\HY\]Y[BZ[H]KXX\^H\\Y\[]X[]]]B\X\Y]Y\]\HY\Y]\X\]Y\[ۜ˂LΈHXZ[ۘ\و[\\X\\H\Z[X[]HقXXX [[X[X[]H[]YY\H]^\[[][[[Y\˂]XHX[Y[][ۜ܂YXK\ۜ[[H]B[\\X\Y\[\B\Y\’NHݙ\[XH[\X][ۈقH\\^H\]H\\[ۂۈHY]]HYXوXXX[][[[Y\[^B][[ۈH\YHوܛX[B]\[Z]K\X[\H[\\›و]X[]Hو[]][ۜˈ\\B\\[]][[ۈ\[œXXX][[][[[Y\[H\[\HHXZ܈\\œYYY[Y[Y\X]H\ܚX[H]XY\][›وX ][]H\[[[ۜ ݙ\Y[[[[B[\X\\][\H\™[[\وܛ K\YH\[XX™X][[][[[Y\[HHX]\وۘ\ܜ[›]X ^[ۙ\^[Y[\X]Y\BXZ\\H[Y\\\XHXܚ\\˂H^\\H[HXۙ\^H][[X[8&X\H\[\[\&H[H\Y[[[Y[ˈ^H[YBX[XZ\[8&ۛۈ[X[Y\&B\HY[[HXۛ^H]ZY[X[Hܙ\[H[ Xۂܚ\\ˈ\\][H\Yۂ][\H^HXXܛXۛZX\XX\˜[Xܜٝ[\H]\8&X\B\[&H؋]\][HX]]\Hܚ\\X^H]HY\[H][\ۙ\[ۜY\[HZ^Y\ܛX[HوX\^X\]Y\ KˈZ[\\[X\]BYH\ܚ\\K][[[Y\œ[[H[Hۈ\H˂Y\XK]]ܚ]Y\[X[BZ\ۈ؜\][ۜ]ܙX\ق&X\H\[\[\&K^H\\^HX\]Y[Bو[ݙ\HHX[Y