The External Debt Burden and Economic Growth in the 1980s: Evidence from sub-Saharan Africa

External Debt and Economic Growth in Vietnam: A Nonlinear Relationship

“…F. S. Ayadi and F. O. Ayadi (2008) also concluded that increasing external debt would decrease economic growth in Nigeria and South Africa. This conclusion is similar to the findings by Fosu (1996) for sub-Saharan African countries. Ahmed and Shakur (2011) analyzed the long-and short-term relationship between external debt and economic growth of Pakistan, which also concluded that the burden of debt obligations had negative impacts on labor and capital productivity, created debt pressure, and in turn would reduce Pakistan's debt repayment capability and thereby adversely affecting the economic growth.…”

“…In addition, when the scale of debt increases, the uncertainty about the actions and policies in which the government will proceed to cover its debt obligations would cause adverse effects on investment as a job to payment of debts (Agénor & Montiel, 2008). Fosu (1996) studied 29 countries in sub-Saharan Africa, also supported for the existence of debt overhang theory. Shabbir's study (2013) considered the direct effect of foreign debt and indirect effects (through investments) on the economic growth of over 24 developing countries and concluded that the effect of foreign debt on economic growth has a nonlinear curve.…”

“…Skewness > 0 shows that the graph tends to IMF(2003), Pattilo (2002), Magheyereh (2001), Osinubi (2006) Chenery and Strout (1966) Paudel (2009) Uzun (2012) Ayadi (2008), Fosu (1996), Ahmed (2008), Shabbir (2013), Antwi (2013) concentrate to the left and tail down towards the right. In addition, there is a large difference between the minimum value (15.46%) and maximum value (44%), which shows the volatility of external debt for different periods.…”

Trade shocks and macroeconomic fluctuations in Africa

“…In table 5b, the results of a simulation when only productivity shocks are present are 23 We would like to thank the referee for suggesting this exercise. 24 These results are in line with those findings by van Wincoop (1992) who argues that whether export sector expands or contracts in response to an exogenous shock depends on the labor supply movements between that sector and the other sectors of the economy in developing countries which face extremely volatile export prices.…”

“…This, in turn, might reduce the effect of these shocks in generating business cycles. 23 Fourth, and probably the most important, it might be the case that since the ratio of foreign interest rate payments to output is not sufficiently large in our benchmark calibration, world real interest rate shocks unable to generate strong enough income and substitution effects to have a sizeable impact on economic fluctuations. In section 6.3 we study the last two possibilities and show that as the steady state trade deficit-output ratio gets larger world real interest rate shocks become more important in driving macroeconomic activity in African countries.…”