Real Equilibrium Exchange Rates and Debt Overhang in Sub-Saharan African Countries

The main purpose of this paper is to demonstrate the effect of debt overhang on real equilibrium exchange rate. Using a panel of twenty Sub-Saharan African countries, we find a non linear effect of external public debt on real exchange rate. External public debt negatively affects the real exchange rate up to about 90% and 100% of GDP. This result is supported by panel unit root test and panel co integration test. The main surplus of this paper is to show a non linear effect of debt on real exchange rates in African countries