The Impact of External Debt on Economic Growth in Ghana: A Cointegration Analysis

Frimpong, Joseph Magnus; Oteng-Abayie, Eric Fosu

doi:10.4314/just.v26i3.33013

Cited by 35 publications

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“…The weak coefficient is not surprising because debt relief reduced the acute effect of external debt compared to the previous period. This result supports the findings of Adegbite et al (), Ayadi and Ayadi (), Were (), Wamboye (), Adepoju et al (), Ramzan and Ahmad (), Ayadi and Ayadi (), Fosu (), and Abdelhafidh (), but contradicts the findings of Mohamed () and Frimpong and Oteng‐Abayie (). It is important to note that debt reduction or relief on its own may not provide the desired improvement in economic growth as strong macroeconomic policies, and institutional frameworks are critical for this to happen (Arslanalp and Henry, ).…”

Section: Resultssupporting

confidence: 83%

“…Principal component analysis (PCA) is used to avoid the multicollinearity inherent in using two or more debt indicators simultaneously, which may lead to improper conclusions. Secondly, there is no consensus among researchers on the utilization of a single indicator to measure external debt sustainability (see, for example, Were, ; Frimpong and Oteng‐Abayie, ; Adepoju et al ., ; Ayadi and Ayadi, ). Based on these justifications, we construct an index proxy for external debt indicators known as ‘external debt sustainability index ( esi )’.…”

Section: Methodsmentioning

confidence: 99%

“…The authors confirmed a negative relationship between external debt and growth. However, Frimpong and Oteng‐Abayie () investigated the impact of external debt on economic growth in Ghana from 1970 through 1999 and found a positive and significant effect of external debt on economic growth. Tchereni et al () used annual data from 1975 to 2003 to analyse the impact of foreign debt on economic growth in Malawi.…”

Section: Literature Reviewmentioning

confidence: 99%

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External Debt and Growth Dynamics in Nigeria

Adamu¹,

Rasiah²

2016

African Development Review

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This paper investigates the dynamic effects of external debt on economic growth in Nigeria from 1970 through 2013. We begin by constructing an external debt sustainability index using principal component analysis to capture the overall effects of external debt indicators on economic growth. The empirical analysis is based on the ARDL bound test. The results show a long‐run cointegration relationship between the variables. While external debt exerts an adverse effect of −0.069 per cent on growth in the long run, the external debt sustainability index shows a positive effect of 0.072 per cent and 0.024 per cent on growth in the long and short run. The findings suggest the government should reduce its expenditure and mobilize revenue through domestic sources to invest in projects with a high rate of return to enable debt repayment and stimulate growth. To maintain debt ratios within a manageable threshold so as to avoid being debt trapped, foreign loans should only be contracted on concessional terms.

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Section: Resultssupporting

confidence: 83%

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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External Debt and Growth Dynamics in Nigeria

Adamu¹,

Rasiah²

2016

African Development Review

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“…This implies that the external loans obtained were either embezzled or diverted through corrupt deals that did not add value to the nation's investment to generate adequate income for debt repayment, and affects growth negatively. This coincides with the works of Adamu and Rajah (2016), Adegbite et al, (2008) and Tchereni et al, (2013), but contradict the conclusions of Amin and Audu (2006) and Frimpong and Oteng-Abayie (2006), respectively. Similarly, population growth is negative and statistically significant in the first year lag.…”

Section: Resultscontrasting

confidence: 42%

“…Frimpong and Oteng-Abayie (2006) used the VECM approach from 1979 to 1999 in Ghana. The study reveals a positive and significant correlation between external debt and economic growth.…”

Section: Relationship Between External Debt and Economic Growthmentioning

confidence: 99%

Oil revenues, External debt, and Growth in Nigeria

Adamu¹

2017

Preprint

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Revisiting the dynamic impact of external debt on economic growth in Nigeria: Cointegration and conditional causality analysis

Faizulayev

Bakitjanovna

Wada³

2020

Journal of Public Affairs

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This study examines the dynamic effects of external debt stocks on real economic growth in Nigeria—incorporating debt services, interest rate, inflation, and capital formation. The study utilizes annual time series from 1981 to 2017 employing the dynamic autoregressive distributed lag (ARDL) cointegration bounds test methodology. Empirical findings indicated that external debt stocks and debt services have a significant effect on real economic growth both in the short and long run. The result of the pairwise conditional Granger causality gives a short run procyclical bidirectional nexus between capital formation and economic growth. Thus, external debt stocks affect real GDP via the channels of accumulated debts, debt services, and macroeconomic variable fluctuations in the long run. Result obtained supports the objective of the Nigerian Debt Management Office in optimally managing the nation's external debt.

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The Impact of External Debt on Economic Growth in Ghana: A Cointegration Analysis

Cited by 35 publications

References 0 publications

External Debt and Growth Dynamics in Nigeria

External Debt and Growth Dynamics in Nigeria

Oil revenues, External debt, and Growth in Nigeria

Revisiting the dynamic impact of external debt on economic growth in Nigeria: Cointegration and conditional causality analysis

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