FACTORS INFLUENCING THE FOREIGN DEBT SAFETY: AN EMPIRICAL STUDY

This paper analyzes the relationship between the economic development level, foreign exchange reserves, real exchange rate, the expansion of opening up (openness) and the foreign debt safety. The openness was rarely considered in the past. However, it is an important factor that can influence the foreign debt safety. In this paper, we set openness as one of the variables and constructed a special vector auto-regressive model, used 831 historical monthly data samples for empirical analysis. The result indicates that 1) economic development and openness exert long-term significant negative impact on the foreign debt-to-GDP ratio, which means they exert a positive effect on the foreign debt safety conversely; 2) the rise of real exchange rate can add to the burden of foreign debts and therefore influence debt safety; 3) a rational structure of foreign exchange reserves plays an essential role in foreign debt safety.