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This study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants.

The authors utilize an Auto Regressive Distributed Lag (ARDL) model to examine the symmetric impact of external debt on inflation, while the asymmetric impact is examined using a Nonlinear ARDL (NARDL) model. The existence of a long-run relationship between inflation and external debt is tested using the bounds-testing approach to cointegration, and a vector error-correction model is estimated to determine the short parameters of equilibrium dynamics.

The linear ARDL model results show that external debt has no statistically significant impact on inflation in the long run. On the contrary, the results of the NARDL model show that positive and negative external debt shocks statistically affect inflation in the long run. The estimated long-run elasticity coefficients of the linear and nonlinear ARDL models reveal that the domestic money supply has a statistically significant positive impact on inflation. In contrast, the nominal effective exchange rate has a statistically significant negative impact on inflation.

The reliance on symmetric analysis may not be sufficient to uncover the existence of a linkage between external debt and inflation. Proper external debt management is crucial to control inflation rates in Sudan.

To date, no empirical study has assessed the external debt-inflation nexus and its potential asymmetry in Sudan, and the current study aims to fill this gap in the literature.

This paper investigates the asymmetric impact of the real effective exchange rate (REER) on Egypt's real domestic output from 1960 to 2020.

A Nonlinear Autoregressive Distributed Lag (NARDL) model is utilized to isolate real currency depreciations from appreciations and account for the potential asymmetry in the impact of the REER. The analyses account for the various channels via which the REER could affect domestic output.

Results show evidence of a long-run asymmetry in the output effect of REER changes in which only real currency depreciations have a contractionary impact on output, while the REER has no impact on output in the short run.

The Egyptian monetary authority cannot rely on domestic currency depreciation as a policy instrument to boost domestic output.

Unlike most of the previous studies, which assume linearity in the impact of the REER on output, we relax this assumption and hypothesize that the REER changes have an asymmetric effect on the Egyptian domestic output in Egypt. We use a long time span from 1960 to 2020 and control for the potential structural breaks in the REER-output nexus and the various channels through which the REER can affect domestic output.