Sovereign Asset and Liability Management (SALM) and Efficient Debt Management: A Comprehensive Review of Short-Run Dynamics, Long-Run Relationships, and Asymmetric Effects

Abstract

This comprehensive review examines the application and impact of Sovereign Asset and Liability Management (SALM) on efficient debt management. The study synthesizes existing literature to explore the short-run dynamics, long-run relationships, and asymmetric effects between SALM components and debt management outcomes. Drawing on a wide range of empirical studies, the paper analyzes the complex interplay between external debt, government expenditure, foreign reserves, and economic growth. Key findings reveal significant short-run and long-run relationships between these variables, with notable asymmetric effects in areas such as oil price changes, exchange rates, and fiscal policy. The review highlights the importance of an integrated approach to SALM, emphasizing the need for policymakers to consider both immediate impacts and long-term consequences of financial decisions. It also underscores the challenges of implementing SALM in developing economies, including data limitations and institutional constraints. By critically examining the existing body of research, this review contributes to a deeper understanding of SALM practices in Jordan and similar developing countries. The paper concludes by identifying gaps in current knowledge and suggesting directions for future research, including the need for more disaggregated analyses and exploration of nonlinear relationships. These insights offer valuable guidance for policymakers seeking to enhance debt sustainability and economic resilience through effective SALM strategies.