The Debt-Growth Nexus: a Dynamic Panel Data Estimation
AbstractThis paper investigates the relationship between external debt and economic growth in developing countries. Notwithstanding a general agreement on theory, empirical evidence is not conclusive and lacks of robustness. This contribution aims to shed more light on the relationship between external debt and economic growth and to draw some policy implication for debt relief. This work highlights the critical role of econometric and methodological issues. The results for a panel of 69 developing countries over the period 1977-2002 support a negative linear relationship between external debt and economic growth, and between debt service and investment. These effects seem to be stronger in the Low-Income Countries than in the overall sample, raising concern about the dramatic effect that debt has on economic performance in the world's poorest countries. Eventually, external debt impairs economic growth through the liquidity constraint, the creation of macroeconomic instability, a reduced total factor productivity, and its effect on macroeconomic policies and institutional development.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Società editrice il Mulino in its journal Rivista italiana degli economisti.
Volume (Year): (2006)
Issue (Month): 3 ()
Contact details of provider:
External Debt; HIPC; Debt Relief; Economic Growth.;
Other versions of this item:
- Andrea PRESBITERO, 2005. "The Debt-Growth Nexus: a Dynamic Panel Data Estimation," Working Papers 243, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- HÃ©lÃ¨ne Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002.
"External Debt and Growth,"
IMF Working Papers
02/69, International Monetary Fund.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Bond, Steve & Leblebicioglu, Asli & Schiantarelli, Fabio, 2004.
"Capital Accumulation and Growth: A New Look at the Empirical Evidence,"
IZA Discussion Papers
1174, Institute for the Study of Labor (IZA).
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2010. "Capital accumulation and growth: a new look at the empirical evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1073-1099, November/.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," Boston College Working Papers in Economics 591, Boston College Department of Economics, revised 02 Aug 2007.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," Economics Papers 2004-W08, Economics Group, Nuffield College, University of Oxford.
- Krugman, Paul, 1988.
"Financing vs. forgiving a debt overhang,"
Journal of Development Economics,
Elsevier, vol. 29(3), pages 253-268, November.
- Hoeffler, Anke E, 2002.
" The Augmented Solow Model and the African Growth Debate,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 64(2), pages 135-58, May.
- Anke E. Hoeffler, 2000. "The Augmented Solow Model and the African Growth Debate," CID Working Papers 36, Center for International Development at Harvard University.
- Easterly, William & Loayza, Norman & Montiel, Peter, 1997.
"Has Latin America's post-reform growth been disappointing?,"
Policy Research Working Paper Series
1708, The World Bank.
- Easterly, William & Loayza, Norman & Montiel, Peter, 1997. "Has Latin America's post-reform growth been disappointing?," Journal of International Economics, Elsevier, vol. 43(3-4), pages 287-311, November.
- Kiviet, Jan F., 1995.
"On bias, inconsistency, and efficiency of various estimators in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, . "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
- Janvier Nkurunziza & Robert H. Bates, 2003.
"Political Institutions and Economic Growth in Africa,"
Economics Series Working Papers
WPS/2003-03, University of Oxford, Department of Economics.
- Janvier Nkurunziza & Robert Bates, 2004. "Political Institutions And Economic Growth In Africa," Development and Comp Systems 0409028, EconWPA.
- Janvier D. Nkurunziza & Robert H. Bates, 2003. "Political Institutions and Economic Growth in Africa," CSAE Working Paper Series 2003-03, Centre for the Study of African Economies, University of Oxford.
- Gupta, Sanjeev & Clements, Benedict & Baldacci, Emanuele & Mulas-Granados, Carlos, 2005. "Fiscal policy, expenditure composition, and growth in low-income countries," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 441-463, April.
- Presbitero, Andrea F., 2006.
"The debt-growth nexus in poor countries: a reassessment,"
Proceedings of the German Development Economics Conference, Berlin 2006
22, Verein für Socialpolitik, Research Committee Development Economics.
- Presbitero, Andrea F., 2008. "The Debt-Growth Nexus in Poor Countries: A Reassessment," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(30), pages 1-28.
- Presbitero, Andrea F., 2007. "The debt-growth nexus in poor countries: a reassessment," Economics Discussion Papers 2007-17, Kiel Institute for the World Economy.
- Winston Moore & Chrystol Thomas, 2010.
"A meta-analysis of the relationship between debt and growth,"
International Journal of Development Issues,
Emerald Group Publishing, vol. 9(3), pages 214-225, July.
- Moore, Winston & Thomas, Chrystol, 2008. "A Meta-Analysis of the Relationship between Debt and Growth," MPRA Paper 21474, University Library of Munich, Germany.
- Andrea Filippo Presbitero, 2009.
"Debt Relief Effectiveness and Institution Building,"
Mo.Fi.R. Working Papers
15, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Andrea F. Presbitero, 2009. "Debt-Relief Effectiveness and Institution-Building," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 529-559, 09.
- Presbitero, Andrea F., 2008. "Debt Relief Effectiveness and Institution Building," MPRA Paper 12597, University Library of Munich, Germany.
- Qayyum, Unbreen & Musleh ud, Din & Haider, Adnan, 2012. "Foreign Aid, External Debt and Governance," MPRA Paper 40260, University Library of Munich, Germany.
- Aiello, Francesco & Pupo, Valeria, 2012. "Structural funds and the economic divide in Italy," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 403-418.
- António Afonso & Sebastian Hauptmeier, 2009. "Public Debt and Economic Growth: a Granger Causality Panel Data Approach," Working Papers Department of Economics 2009/24, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Aiello Francesco & Pupo Valeria, 2011.
"Structural Funds and Economic Divide in Italy,"
ERSA conference papers
ersa10p136, European Regional Science Association.
- Francesco Aiello & Valeria Pupo, 2009. "Structural Funds And Economic Divide In Italy," Working Papers 200914, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
- Aiello, Francesco & Pupo, Valeria, 2009. "Structural Funds and Economic Divide in Italy," MPRA Paper 17853, University Library of Munich, Germany.
- Andrea Filippo Presbitero, 2009. "The 2008-2009 Financial Crisis and the HIPCs: Another Debt Crisis?," Mo.Fi.R. Working Papers 29, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Marine Hadengue & Thierry Warin, 2013. "Patterns of Specialization and (Un)conditional Convergence: The Cases of Brazil, China and India," CIRANO Working Papers 2013s-17, CIRANO.
- Cordella, Tito & Missale, Alessandro, 2013.
"To give or to forgive? Aid versus debt relief,"
Journal of International Money and Finance,
Elsevier, vol. 37(C), pages 504-528.
- Hwang, Jen-Te & Chung, Chien-Ping & Wang, Chieh-Hsuan, 2010. "Debt Overhang, Financial Sector Development And Economic Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 51(1), pages 13-30, June.
- Pupo Valeria & Aiello Francesco, 2009. "L'impatto della politica regionale dell'Unione Europea. Uno studio sulle regioni italiane," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 421-454.
- Ben Naceur, Sami & Bakardzhieva, Damyana & Kamar, Bassem, 2012. "Disaggregated Capital Flows and Developing Countries’ Competitiveness," World Development, Elsevier, vol. 40(2), pages 223-237.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.