IDEAS home Printed from https://ideas.repec.org/a/arp/ijefrr/2017p119-129.html
   My bibliography  Save this article

An Error Correction Model Analysis of the Effect of Total External Debt on the Nigerian Economy (1980–2015)

Author

Listed:
  • Nwaoha, William Chimee

    (Adjunct-Lecturer Dept. of Economics, Institute of Ecumenical Education, Enugu in Affiliation with Enugu State University of Science & Technology (ESUT), Nigeria)

  • Ejem, Chukwu Agwu

    (Lecturer Dept. of Banking & Finance, Abia State Polytechnic, Aba, Nigeria)

  • Egwu, Charles Chukwudinma

    (Lecturer Dept. of Banking & Finance, Abia State Polytechnic, Aba, Nigeria)

  • Ugoji-Eke, Patience Nnenna

    (Lecturer Dept. of Banking & Finance, Abia State Polytechnic, Aba, Nigeria)

  • Nwabeke, Chidinma Elizabeth

    (Lecturer Dept. of Banking & Finance, Abia State Polytechnic, Aba, Nigeria)

Abstract

This study used error correction model (ECM) to analyse the effect of total external debt (TED) on the Nigerian economy proxied by gross domestic product (GDP) during the period 1980-2015. The data such as TED and GDP were obtained from Central Bank of Nigeria (CBN) statistical bulletin. The result of the finding revealed that total external debt exerts negative and significant influence on GDP. This implies that, as total external debt increases, GDP also decreases and vice versa. Therefore, the researcher recommends that any external loan obtained by the government should be channelled to productive projects that yield high on returns on investment rather than allocating the fund to finance dead-weight debt, hence, engendering sustainable economic growth in the economy.

Suggested Citation

  • Nwaoha, William Chimee & Ejem, Chukwu Agwu & Egwu, Charles Chukwudinma & Ugoji-Eke, Patience Nnenna & Nwabeke, Chidinma Elizabeth, 2017. "An Error Correction Model Analysis of the Effect of Total External Debt on the Nigerian Economy (1980–2015)," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 3(8), pages 119-129, 08-2017.
    • Handle: RePEc:arp:ijefrr:2017:p:119-129
    as

    Download full text from publisher

    File URL: http://www.arpgweb.com/pdf-files/ijefr3(8)119-129.pdf
    Download Restriction: no
    File URL: http://www.arpgweb.com/?ic=journal&journal=5&month=08-2017&issue=8&volume=3
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    2. Andrew M. Warner, 1992. "Did the Debt Crisis Cause the Investment Crisis?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1161-1186.
    3. Rehana Siddiqui & Afia Malik, 2001. "Debt and Economic Growth in South Asia," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 677-688.
    4. Unbreen Qayyum & Adnan Haider, 2012. "Foreign Aid, External Debt and Economic Growth Nexus in Low-Income Countries: The Role of Institutional Quality," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 97-116.
    5. Qayyum, Unbreen & Din, Musleh-ud & Haider, Adnan, 2014. "Foreign aid, external debt and governance," Economic Modelling, Elsevier, vol. 37(C), pages 41-52.
    6. Abdur Chowdhury, 2001. "External Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis," WIDER Working Paper Series DP2001-95, World Institute for Development Economic Research (UNU-WIDER).
    7. International Monetary Fund, 1985. "Foreign Private Investment in Developing Countries," IMF Occasional Papers 1985/001, International Monetary Fund.
    8. Toan Quoc Nguyen & Mr. Benedict J. Clements & Ms. Rina Bhattacharya, 2003. "External Debt, Public Investment, and Growth in Low-Income Countries," IMF Working Papers 2003/249, International Monetary Fund.
    9. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
    10. Gersovitz, Mark, 1982. "The estimation of the two-gap model," Journal of International Economics, Elsevier, vol. 12(1-2), pages 111-124, February.
    11. Cochrane, Susan Hill, 1972. "Structural Inflation and the Two-gap Model of Economic Development," Oxford Economic Papers, Oxford University Press, vol. 24(3), pages 385-398, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naeem AKRAM*, 2017. "Role of Public Debt in Economic Growth of Sri Lanka: An ARDL Approach," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(2), pages 189-212.
    2. Saungweme, Talknice & Odhiambo, Nicholas M., 2020. "The Impact of Domestic and Foreign Public Debt on Economic Growth: Empirical Evidence from Zimbabwe," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 77-106.
    3. Manamba EPAPHRA & William MESIET, 2021. "The external debt burden and economic growth in Africa: a panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(627), S), pages 175-206, Summer.
    4. Naeem Akram, 2013. "Empirical examination of debt and growth nexus in South Asian countries," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 20(2), pages 29-52, December.
    5. Serhan ÇIFTÇIOĞLU & Amin SOKHANVAR, 2018. "External Debt- Economic Growth Nexus in Selected CEE Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 85-100, December.
    6. Imbs, Jean & Rancière, Romain, 2005. "The Overhang Hangover," CEPR Discussion Papers 5210, C.E.P.R. Discussion Papers.
    7. Ralf Hepp, 2005. "Can Debt Relief Buy Growth?," International Finance 0510003, University Library of Munich, Germany.
    8. Muhammed BENLI, 2020. "The effect of external debt on long run economic growth in developing economies: Evidence from heterogeneous panel data models with cross sectional dependency," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 127-138, Autumn.
    9. Talknice Saungweme & Nicholas M. Odhiambo, 2019. "Does Public Debt Impact Economic Growth in Zambia? An Ardl-Bounds Testing Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 69(4), pages 53-73, October-D.
    10. Marin Ferry & Marc Raffinot, 2019. "Curse or Blessing? Has the Impact of Debt Relief Lived up to Expectations? A Review of the Effects of the Multilateral Debt Relief Initiatives for Low-Income Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 55(9), pages 1867-1891, September.
    11. Knoll, Martin, 2013. "The heavily indebted poor countries and the multilateral debt relief initiative: A test case for the validity of the debt overhang hypothesis," Discussion Papers 2013/11, Free University Berlin, School of Business & Economics.
    12. Mr. Tito Cordella & Mr. Luca A Ricci & Marta Ruiz-Arranz, 2005. "Debt Overhang or Debt Irrelevance? Revisiting the Debt-Growth Link," IMF Working Papers 2005/223, International Monetary Fund.
    13. Taner Turan & Halit Yanıkkaya, 2021. "External debt, growth and investment for developing countries: some evidence for the debt overhang hypothesis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(3), pages 319-341, September.
    14. repec:eco:journ1:2014-02-19 is not listed on IDEAS
    15. Gakpa, Lewis Landry, 2012. "Inégalités des revenus,endettement et pauvreté dans les pays de l’uemoa : une approche sur données de panel dynamique [Income inequalities, debt, and poverty in WAEMU Countries : A Dynamic Panel Da," MPRA Paper 41896, University Library of Munich, Germany.
    16. Wamboye, Evelyn, 2012. "External debt, trade and FDI on economic growth of least developed countries," MPRA Paper 39031, University Library of Munich, Germany.
    17. Adegboyega Raymond Rahaj, 2018. "Eternal Debt and Economic Growth in Nigeria: An ARDL Approach," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(4), pages 581-596, AUGUST.
    18. Adom, Philip Kofi, 2016. "The DDT Effect: The case of Economic Growth, Public Debt and Democracy Relationship," MPRA Paper 75022, University Library of Munich, Germany, revised 11 Nov 2016.
    19. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    20. Swastika, Purti & Dewandaru, Ginanjar & Masih, Mansur, 2013. "The Impact of Debt on Economic Growth: A Case Study of Indonesia," MPRA Paper 58837, University Library of Munich, Germany.
    21. Brian Tavonga Mazorodze, 2020. "Re-visiting the External Debt-Economic Growth Question in Zimbabwe," Journal of Economics and Behavioral Studies, AMH International, vol. 12(2), pages 1-8.

    More about this item

    Keywords

    GDP; TED; ADF; ECM.;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arp:ijefrr:2017:p:119-129. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Managing Editor (email available below). General contact details of provider: http://www.arpgweb.com/?ic=journal&journal=5&info=aims .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.