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International Journal of Academic Research in Accounting, Finance and Management Sciences

Open Access Journal

ISSN: 2225-8329

The Impact of Sovereign Asset and Liability Management on Efficient Debt Management in Jordan

Haslindar Ibrahim, Mohammed Aljaloudi

http://dx.doi.org/10.6007/IJARAFMS/v14-i3/22091

Open access

This study investigates the impact of Sovereign Asset and Liability Management (SALM) on efficient debt management in Jordan, addressing a significant gap in the literature regarding SALM application in developing economies. Using quarterly data from 2005 to 2023, we employ advanced econometric techniques, including Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models, to analyze both short-run and long-run dynamics, as well as potential asymmetric effects. The research examines the relationships between various SALM components (cash reserves, foreign reserves, equity in state-owned enterprises, future revenues, government debt, fiscal expenditures, and contingent liabilities) and debt management efficiency, measured by the debt-to-GDP ratio. Our findings reveal complex and often asymmetric relationships between SALM components and debt management efficiency. Notably, we find significant long-run effects of cash reserves, foreign reserves, government debt, and contingent liabilities on the debt-to-GDP ratio. The study also uncovers asymmetric effects of equity in state-owned enterprises, future revenues, and fiscal expenditures, indicating that increases and decreases in these variables have differing impacts on debt management efficiency. These results provide valuable insights for policymakers and debt managers in Jordan and similar developing economies, emphasizing the importance of a holistic approach to public financial management that considers both assets and liabilities simultaneously. The study contributes to the growing body of literature on SALM by providing empirical evidence of its impact in a developing country context and highlighting the need for integrated approaches to sovereign debt management.