External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries

Hakimi, Abdelaziz; Boussaada, Rim; Karmani, Majdi

doi:10.11130/jei.2019.34.4.725

Cited by 27 publications

(29 citation statements)

References 44 publications

(44 reference statements)

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“…Similarly, countries who fail to meet their debt obligations suffer from severe macroeconomic imbalances in the form of high fiscal discrepancy, deterioration in foreign exchange reserves, fall in confidence of investors, instability in exchange rate and persistent fall in its credit rating by the international rating agencies (Economic Survey of Pakistan , 2007Pakistan , -2008. It means that when the fund raisers failed to inject the borrowed money in the revenue generating and other productive projects, then excessive borrowing not only leads to reduce the debt servicing and loan amortization abilities of the indebted country but also creates obstacles in the path of getting sustainable economic growth and development in the long run (Abdelaziz et al, 2019). Therefore, the borrowed money should be utilized effectively and productively in such types of developmental and investment-oriented projects which help in enhancing the debt carrying capacity of the debtor country.…”

Section: Introducti̇onmentioning

confidence: 99%

External Debt - Blessing or Curse: Empirical Evidence From Pakistan

ud-Din¹,

Azam

Tariq³

2020

IJEFI

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This study investigates the impact of external debt on the economic growth of Pakistan using annual time series data over the period 1976 to 2018. For this purpose, the syntheses of debt overhang and debt crowding-out hypotheses are examined within the framework of augmented Solow growth model. An autoregressive distributed lag (ARDL) model, Error Correction model and appropriate data diagnostic tests are applied. The empirical results indicate that external borrowing and debt servicing hamper the economic growth in Pakistan. Results reveal that 1% increase in stock of external debt is causing 0.20% fall in economic growth. Similarly,1% increase in debt servicing is causing 0.13% fall in economic growth. The findings of this study suggest that the policy makers should create a conductive environment for bringing increase in the level of domestic savings and exports, and should focus on increasing the inflow of capital through foreign direct investment and attracting the foreign exchange reserves. Incorporation of debt monitoring system along with its management is also required for minimizing the adverse effects of debt overhang and debt crowding out effects of the external debt.

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Section: Introducti̇onmentioning

confidence: 99%

External Debt - Blessing or Curse: Empirical Evidence From Pakistan

ud-Din¹,

Azam

Tariq³

2020

IJEFI

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“…The study employed the seemingly unrelated regressions model. Abdelaziz, et al, (2019), concluded that on one hand, external debt is negatively significant to both the total sample and the subsamples. On the other hand, Foreign trade has a positive significance on growth per capita income.…”

Section: Theoretical Background and Literature Reviewmentioning

confidence: 99%

“…In their study, Abdelaziz, et al, (2019), analyzed the impact of external debt on investment and economic growth. The paper selected a sample of 23 lowincome countries and divided them into subsamples, (12) low indebted countries and ( 11) more indebted countries.…”

Section: Theoretical Background and Literature Reviewmentioning

confidence: 99%

The Impact of External Debt on Economic Growth the Case of Egypt

موسى¹

2022

مجلة السیاسة والاقتصاد

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The external Debt problem is one of the most crucial problems that face the whole world's countries nowadays, either developed or developing countries, creditor or debtor countries. Egypt has been suffering from the debt issue throughout the country's modern history from the beginning of the 1990s like all developing countries. According to international standards, Egypt started to exceed the safe limits and reach 25.5% of debt to the total exports of goods and services. Consequently, the study aims at investigating the relationship between external debt and economic growth in Egypt and pointing out the impacts within the period by adopting ARDL Model. The research reveals the external debt has a negative impact on GDPPC where every 1% increase leads to a 0.12%decrease in GDPPC in the short term. Besides, the insignificant relationship between ED/GDP and GDPPC in the long term the researcher suggests that Egypt must direct new and potential debts to investment so that the desired external assistance is achieved to reduce pressure on the public budget.

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“…Using ordinary least squares method Saxena and Shanker (2018) found a negative impact of external debt on India's economic growth during 1990-91 -2015-16. Abdelaziz et al (2019) examined the impact of debt on investment and growth separately for twelve less indebted and eleven highly indebted countries using SUR method. For the split models as well as for the entire sample the results indicate a negative impact of external debt on investment and growth.…”

Section: A Brief Survey Of the Literaturementioning

confidence: 99%

Untitled

2020

Economy

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This paper attempts to examine the relationship among debt servicing, exports and GDP for India during 1970-2018 using co-integration test, error correction model and Granger causality test. In the bi-variate model with constant trend specification GDP and exports seem to have no long-term relationship. However, change in GDP Granger causes change in exports. For the restricted constant trend specification, in the short run, GDP affects exports positively and significantly. GDP and debt services seem to have a positive and significant long-term relationship in the bivariate model. The tri-variate model including GDP, Exports and debt service reveals a long term relationship among the variables where both exports and debt services affect GDP positively and significantly. GDP, exports and debt stocks do not have any long term relationship with constant trend specification, but change in GDP is found to Granger cause change in exports. For the restricted constant trend specification, however, there seems to be a long term relationship among them. In the short run GDP affects exports positively and significantly. In general, results indicate a positive and significant impact of GDP on exports. A significant positive long run impact of external debt on economic growth is also observed when debt service is the indicator of external debt. The short run impacts of external debt in terms of both debt servicing and debt stocks, however, produce diverse and insignificant results.

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External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries

Cited by 27 publications

References 44 publications

External Debt - Blessing or Curse: Empirical Evidence From Pakistan

External Debt - Blessing or Curse: Empirical Evidence From Pakistan

The Impact of External Debt on Economic Growth the Case of Egypt

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