Inflation, Economic Growth and External Debt Dynamics: Evidence from Emerging Market Economies

Year 2025, Volume: 12 Issue: 3, 1060 - 1082, 30.09.2025

Ayşe Atılgan Yaşa , Nazlı Keyifli Şentürk

Abstract

This study aims to examine the dynamic relationships among inflation, economic growth and external debt in eight emerging market economies—Argentina, Brazil, China, India, Indonesia, Mexico, South Africa, and Türkiye—over the period 1990–2023. By employing the Bootstrap Panel Rolling Window Causality Analysis, the study uncovers the time-varying relationships between these variables as well as cross-country differences. The findings indicate that external debt positively influences inflation in Türkiye, while in Brazil, China, India, and South Africa, inflation contributes to the accumulation of external debt. The analysis also reveals that external debt positively contributes to economic growth in Argentina, whereas in Argentina, Brazil, India, Indonesia, Mexico, and Türkiye, economic growth exerts a negative influence on external debt. The results suggest that the effects of external debt on growth can be interpreted within the frameworks of the Debt Overhang Theory and the Growth-Cum-Debt Model. Highlighting the interaction between external debt, debt management, economic structure, and growth dynamics, the study underscores the importance of sustainable strategies and provides meaningful methodological and theoretical contributions to the literature.

Keywords

Inflation , Economic Growth , External Debt , Emerging Market Economies

Ethical Statement

Ethics Committee approval was not required for this study. The authors declare that the study was conducted in accordance with research and publication ethics. The authors confirm that no part of the study was generated, either wholly or in part, using Artificial Intelligence (AI) tools. The authors declare that there are no financial conflicts of interest involving any institution, organization, or individual associated with this article. Additionally, there are no conflicts of interest among the authors. The authors declare that they contributed equally to all processes of the research.

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