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A meta-analysis of the relationship between debt and growth

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Author Info

  • Winston Moore
  • Chrystol Thomas

Abstract

Purpose – Developing countries tend to be characterised by relatively high levels of indebtedness. The proceeds from debt can potentially have positive effects on growth, if the funds are employed to expand the productive capacity of the nation. The paper aims to investigate whether debt can be used to finance growth. Design/methodology/approach – The paper utilizes meta-analysis approach to address the issue. This approach allows researchers to combine the results from both published and unpublished research to gain insights regarding the directional and statistical significance of the relationship between the two variables. Findings – The results suggest that there exist a positive relationship between debt and economic growth. Research limitations/implications – The findings from the paper suggest that future research should be conscious of the effect model specification can have on the results on their studies. Indeed, when external debt, the fiscal balance, debt relief where included in the econometric specification the relationship between debt and growth was weakened. Practical implications – Economic growth should be stimulated, if the proceeds from debt issues are utilized to finance investment in productive areas of economic activity. Originality/value – While the relationship between debt and growth has stimulated a number of research papers, seminars and conferences, to date, however, no clear answer to the question is available. Through the use of meta-analysis, this paper allows the reader to glean the main findings from this body of research.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Development Issues.

Volume (Year): 9 (2010)
Issue (Month): 3 (July)
Pages: 214-225

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Handle: RePEc:eme:ijdipp:v:9:y:2010:i:3:p:214-225

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Related research

Keywords: Debt; Developing countries; Economic growth;

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References

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  1. Oks, Daniel & van Wijnbergen, Sweder, 1995. "Mexico after the debt crisis: is growth sustainable?," Journal of Development Economics, Elsevier, vol. 47(1), pages 155-178, June.
  2. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
  3. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 04/15, International Monetary Fund.
  4. Presbitero Andrea F., 2006. "The Debt-Growth Nexus: a Dynamic Panel Data Estimation," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 417-462.
  5. Ralf Hepp, 2008. "Can Debt Relief Buy Growth?," Fordham Economics Discussion Paper Series dp2008-22, Fordham University, Department of Economics.
  6. Card, David & Krueger, Alan B, 1995. "Time-Series Minimum-Wage Studies: A Meta-analysis," American Economic Review, American Economic Association, vol. 85(2), pages 238-43, May.
  7. S. M. Ali Abbas & Jakob Christensen, 2007. "The Role of Domestic Debt Markets in Economic Growth," IMF Working Papers 07/127, International Monetary Fund.
  8. John Weeks, 2000. "Latin America and the 'high performing Asian economies': growth and debt," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(5), pages 625-654.
  9. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
  10. Bjerg, Christina & Bjørnskov, Christian & Holm, Anne, 2011. "Growth, debt burdens and alleviating effects of foreign aid in least developed countries," European Journal of Political Economy, Elsevier, vol. 27(1), pages 143-153, March.
  11. Tito Cordella & Luca Antonio Ricci & Marta Ruiz-Arranz, 2005. "Debt Overhang or Debt Irrelevance? Revisiting the Debt Growth Link," IMF Working Papers 05/223, International Monetary Fund.
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