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Year 2015, Volume: 4 Issue: 3, 0 - 0, 29.09.2015

Abstract

References

  • • Arnone, M.; Bandiera, L. and Presbitero, A.F. (2005) “External Debt Sustainability: Theory and Empirical Evidence”, Catholic University of Milan (Piacenza) Working Paper, No. 33, December.
  • • Avramovic, D.; Husain, S.S.; de Weille, J.; Froland, J.; Hayes, J. P.; Wyss, H. (1964). Economic Growth and External Debt. Washington, D.C.: The World Bank.
  • • Bhattacharya, R. and Clements, B. (2004) Finance and Development, 41(4), 48-50.
  • • Breusch, T.S. and Pagan, A.R. (1980) “The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics", Review of Economic Studies, 47(1), 239-253.
  • • Chenery, H.B. and Strout, A.M. (1966) “Foreign Assistance and Economic Development”, American Economic Review, 56(4), 679-733.
  • • Chowdhury, A.R. (2001) “Foreign Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis”, WIDER Discussion Papers, World Institute for Development Economics (UNU-WIDER), No.2001/95.
  • • Claessens, S. (1990) "The Debt Laffer Curve: Some Estimates", World Development, 18(12), 1671-1677.
  • • Claessens, S.; Detragiache, E.; Kanbur, R. and Wickham, P. (1996). "Analytical aspects of the debt problems of heavily indebted poor countries”, World Bank Policy Research Working Paper Series, No.1618.
  • • Clements, B.; Bhattacharya, R. and Nguyen, T.Q. (2003) “External Debt, Public Investment, and Growth in Low-Income Countries”, IMF Working Paper, No.03/249.
  • • Cohen, D. (1993) "Low Investment and Large LDC Debt in the 1980s", American Economic Review, 83(3), 437-449.
  • • Cordella, T.; Ricci, L.A. and Ruiz-Arranz, M. (2005) “Debt Overhang or Debt Irrelevance?Revisiting the Debt-Growth Link”, IMF Working Paper, No.05/223.
  • • Desphande, A. (1997) “The Debt Overhang and the Disincentive to Invest”, Journal of Development Economics, 52, 169-187.
  • • Easterly, W. (2002) “How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief”, World Development, 30(10), 1677-1696.
  • • Elbadawi, I.; Ndulu, B. and Ndung, N. (1997) “Debt Overhang and Economic Growth in Sub-Saharan Africa,” in External Finance for Low-Income Countries, ed. by Iqbal, Zubair and Ravi Kanbur, Washington: IMF Institute, 49-76.
  • • Eratas, F. and Basci Nur, H. (2013) “Dış Borç ve Ekonomik Büyüme İlişkisi: ‘Yükselen Piyasa Ekonomileri’ Örneği”, Marmara Üniversitesi İİB Dergisi, 35(2), 207-230 (in Turkish).
  • • Fosu, A.K.F. (1996) “The Impact of External Debt on Economic Growth in Sub- Saharan Africa”, Journal of Economic Development, 21(1), 93-118.
  • • Greene, J. and Villanueva, D. (1991) "Private Investment in Developing Countries", IMF Staff Papers, 38(1), 33-58.
  • • Griffin, K. and Enos, J. (1970) “Foreign Assistance: Objectives and Consequences”, Economic Development and Cultural Change, 18, 313-327.
  • • Hadri, K. and Kurozumi, E. (2012) “A Simple Panel Stationarity Test in the Presence of Serial Correlation and a Common Factor”, Economics Letters, 115, 31–34.
  • • Herzer, D. and Vollmer, S. (2012) “Inequality and Growth: Evidence from Panel Cointegration”, Journal of Economic Inequality, 10, 489-503.
  • • International Monetary Fund (2002) “The Enhanced HIPC Initiative and the Achievement of Long-Term External Debt Sustainability”, Staff Papers, April 2002.
  • • Krugman, P (1988) “Financing vs. Forgiving a Debt Overhang”, Journal of Development Economics, 29, 253-268.
  • • Oks, D. and van Wijnbergen, S. (1994) "Mexico After the Debt Crisis: is Growth Sustainable?", World Bank Policy Research Working Papers, No.1378.
  • • Patillo, C.; Poirson, H., and Ricci, L. (2002) “External Debt and Growth”, IMF Working Paper, No.02/69 (also published as Patillo, C.; Poirson, H., and Ricci, L. (2011) “External Debt and Growth”, Review Economics and Institutions, 2(3), 1- 30.)
  • • Patillo, C.; Poirson, H., and Ricci, L. (2004) “What Are the Channels Through Which External Debt Affects Growth?”, IMF Working Paper, No.04/15.
  • • Pesaran, M.H. (2004) “General Diagnostic Tests for Cross Section Dependence in Panels”, University of Cambridge Working Papers, No.0435.
  • • Pesaran, M.H. (2006) “Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure”, Econometrica, 74(4), 967-1012.
  • • Pesaran, M.H. (2007) “A Simple Panel Unit Root Test in Presence of Cross-Section Dependence”, Journal of Applied Econometrics, 22, 265–312.
  • • Pesaran, M.H. and Yamagata, T. (2008) Testing slope homogeneity in large panels, Journal of Econometrics, 142, 50–93.
  • • Presbitero, A.F. (2005) “The Debt-Growth Nexus: a Dynamic Panel Data Estimation”, Universita Politecnica Delle Marche, Department of Economics Working Paper, No.243.
  • • Sachs, J. (1989) “The Debt Overhang of Developing Countries” in Calvo, G.A.; Findlay, R; Kouri, P and De Macedo, JB (eds) Debt Stabilization and Development: Essays in Memory of Carlos Diaz Alejandro. Oxford: Basil Blackwell, 80-102.
  • • Savvides, A. (1992) "Investment Slowdown in Developing Countries During the 1980s: Debt Overhang or Foreign Capital Inflows," Kyklos, 45(3), 363-378.
  • • Schclarek, Alfredo (2004) "Debt and Economic Growth in Developing and Industrial Countries", Lund University, Department of Economics Working Papers, No.2005/34. • Serieux, J. and Samy, Y. (2001) “The Debt Service Burden and Growth: Evidence from Low-Income Countries”, presented at WIDER Conference on Debt Relief, 17-18 August 2001, Helsinki, Finland.
  • • Serven, L. (1997) “Uncertainty, Instability, and Irreversible Investment: Theory, Evidence, and Lessons for Africa”, World Bank Policy Research Working Paper, No.1772.
  • • Westerlund, J and Edgerton, L.E. (2007) “A Panel Boostrap Cointegration Test”, Economics Letters, 97, 185-190.

EXTERNAL DEBT AND ECONOMIC GROWTH: NEW EVIDENCE FOR AN OLD DEBATE

Year 2015, Volume: 4 Issue: 3, 0 - 0, 29.09.2015

Abstract

This study aims to contribute to the understanding of the impact of external debt on economic growth by using the data for moderately indebted middle-income countries over the period of 1985-2013. The paper employs a relatively recent panel analysis technique, the common correlated effects (CCE) framework, which considers cross-sectional dependence and heterogeneity implications in the data. Our overall findings suggest a negative linear effect of external debt for the panel despite some exceptions in the country-specific results. In the panel results, the impact of external indebtedness occurs through the debt stock rather than a direct impact of liquidity constraint represented by a debt service variable.

References

  • • Arnone, M.; Bandiera, L. and Presbitero, A.F. (2005) “External Debt Sustainability: Theory and Empirical Evidence”, Catholic University of Milan (Piacenza) Working Paper, No. 33, December.
  • • Avramovic, D.; Husain, S.S.; de Weille, J.; Froland, J.; Hayes, J. P.; Wyss, H. (1964). Economic Growth and External Debt. Washington, D.C.: The World Bank.
  • • Bhattacharya, R. and Clements, B. (2004) Finance and Development, 41(4), 48-50.
  • • Breusch, T.S. and Pagan, A.R. (1980) “The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics", Review of Economic Studies, 47(1), 239-253.
  • • Chenery, H.B. and Strout, A.M. (1966) “Foreign Assistance and Economic Development”, American Economic Review, 56(4), 679-733.
  • • Chowdhury, A.R. (2001) “Foreign Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis”, WIDER Discussion Papers, World Institute for Development Economics (UNU-WIDER), No.2001/95.
  • • Claessens, S. (1990) "The Debt Laffer Curve: Some Estimates", World Development, 18(12), 1671-1677.
  • • Claessens, S.; Detragiache, E.; Kanbur, R. and Wickham, P. (1996). "Analytical aspects of the debt problems of heavily indebted poor countries”, World Bank Policy Research Working Paper Series, No.1618.
  • • Clements, B.; Bhattacharya, R. and Nguyen, T.Q. (2003) “External Debt, Public Investment, and Growth in Low-Income Countries”, IMF Working Paper, No.03/249.
  • • Cohen, D. (1993) "Low Investment and Large LDC Debt in the 1980s", American Economic Review, 83(3), 437-449.
  • • Cordella, T.; Ricci, L.A. and Ruiz-Arranz, M. (2005) “Debt Overhang or Debt Irrelevance?Revisiting the Debt-Growth Link”, IMF Working Paper, No.05/223.
  • • Desphande, A. (1997) “The Debt Overhang and the Disincentive to Invest”, Journal of Development Economics, 52, 169-187.
  • • Easterly, W. (2002) “How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief”, World Development, 30(10), 1677-1696.
  • • Elbadawi, I.; Ndulu, B. and Ndung, N. (1997) “Debt Overhang and Economic Growth in Sub-Saharan Africa,” in External Finance for Low-Income Countries, ed. by Iqbal, Zubair and Ravi Kanbur, Washington: IMF Institute, 49-76.
  • • Eratas, F. and Basci Nur, H. (2013) “Dış Borç ve Ekonomik Büyüme İlişkisi: ‘Yükselen Piyasa Ekonomileri’ Örneği”, Marmara Üniversitesi İİB Dergisi, 35(2), 207-230 (in Turkish).
  • • Fosu, A.K.F. (1996) “The Impact of External Debt on Economic Growth in Sub- Saharan Africa”, Journal of Economic Development, 21(1), 93-118.
  • • Greene, J. and Villanueva, D. (1991) "Private Investment in Developing Countries", IMF Staff Papers, 38(1), 33-58.
  • • Griffin, K. and Enos, J. (1970) “Foreign Assistance: Objectives and Consequences”, Economic Development and Cultural Change, 18, 313-327.
  • • Hadri, K. and Kurozumi, E. (2012) “A Simple Panel Stationarity Test in the Presence of Serial Correlation and a Common Factor”, Economics Letters, 115, 31–34.
  • • Herzer, D. and Vollmer, S. (2012) “Inequality and Growth: Evidence from Panel Cointegration”, Journal of Economic Inequality, 10, 489-503.
  • • International Monetary Fund (2002) “The Enhanced HIPC Initiative and the Achievement of Long-Term External Debt Sustainability”, Staff Papers, April 2002.
  • • Krugman, P (1988) “Financing vs. Forgiving a Debt Overhang”, Journal of Development Economics, 29, 253-268.
  • • Oks, D. and van Wijnbergen, S. (1994) "Mexico After the Debt Crisis: is Growth Sustainable?", World Bank Policy Research Working Papers, No.1378.
  • • Patillo, C.; Poirson, H., and Ricci, L. (2002) “External Debt and Growth”, IMF Working Paper, No.02/69 (also published as Patillo, C.; Poirson, H., and Ricci, L. (2011) “External Debt and Growth”, Review Economics and Institutions, 2(3), 1- 30.)
  • • Patillo, C.; Poirson, H., and Ricci, L. (2004) “What Are the Channels Through Which External Debt Affects Growth?”, IMF Working Paper, No.04/15.
  • • Pesaran, M.H. (2004) “General Diagnostic Tests for Cross Section Dependence in Panels”, University of Cambridge Working Papers, No.0435.
  • • Pesaran, M.H. (2006) “Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure”, Econometrica, 74(4), 967-1012.
  • • Pesaran, M.H. (2007) “A Simple Panel Unit Root Test in Presence of Cross-Section Dependence”, Journal of Applied Econometrics, 22, 265–312.
  • • Pesaran, M.H. and Yamagata, T. (2008) Testing slope homogeneity in large panels, Journal of Econometrics, 142, 50–93.
  • • Presbitero, A.F. (2005) “The Debt-Growth Nexus: a Dynamic Panel Data Estimation”, Universita Politecnica Delle Marche, Department of Economics Working Paper, No.243.
  • • Sachs, J. (1989) “The Debt Overhang of Developing Countries” in Calvo, G.A.; Findlay, R; Kouri, P and De Macedo, JB (eds) Debt Stabilization and Development: Essays in Memory of Carlos Diaz Alejandro. Oxford: Basil Blackwell, 80-102.
  • • Savvides, A. (1992) "Investment Slowdown in Developing Countries During the 1980s: Debt Overhang or Foreign Capital Inflows," Kyklos, 45(3), 363-378.
  • • Schclarek, Alfredo (2004) "Debt and Economic Growth in Developing and Industrial Countries", Lund University, Department of Economics Working Papers, No.2005/34. • Serieux, J. and Samy, Y. (2001) “The Debt Service Burden and Growth: Evidence from Low-Income Countries”, presented at WIDER Conference on Debt Relief, 17-18 August 2001, Helsinki, Finland.
  • • Serven, L. (1997) “Uncertainty, Instability, and Irreversible Investment: Theory, Evidence, and Lessons for Africa”, World Bank Policy Research Working Paper, No.1772.
  • • Westerlund, J and Edgerton, L.E. (2007) “A Panel Boostrap Cointegration Test”, Economics Letters, 97, 185-190.
There are 35 citations in total.

Details

Journal Section Articles
Authors

Aylin Soydan This is me

Serap Bedir

Publication Date September 29, 2015
Published in Issue Year 2015 Volume: 4 Issue: 3

Cite

APA Soydan, A., & Bedir, S. (2015). EXTERNAL DEBT AND ECONOMIC GROWTH: NEW EVIDENCE FOR AN OLD DEBATE. Journal of Business Economics and Finance, 4(3). https://doi.org/10.17261/Pressacademia.2015313068

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