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The Debt-Growth Nexus in Poor Countries: A Reassessment

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Author Info
Presbitero, Andrea F.

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Abstract

The paper investigates the relationship between external debt and economic growth, focusing on the role played by the policy and institutional framework. Results for a panel of 114 developing countries show that the debt-growth nexus depends on institutions and policies. The Debt-Laffer curve looses statistical significance once institutional quality is controlled for and debt overhang seems to be at work exclusively in countries with sound institutions. On the contrary, external debt proves to be irrelevant for countries with weak institutions. A policy implication is that efficient debt relief policies should be tailored to country-specific characteristics and conditional to a certain level of institutional quality.

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Publisher Info
Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 2 (2008)
Issue (Month): 30 ()
Pages: 1-28
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Handle: RePEc:zbw:ifweej:7397

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Related research
Keywords: External debt; HIPC; debt relief; economic growth;

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Find related papers by JEL classification:
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data

References listed on IDEAS
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.:

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  19. 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. [Downloadable!] (restricted)
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  31. Andrea PRESBITERO, 2005. "The Debt-Growth Nexus: a Dynamic Panel Data Estimation," Working Papers 243, Universita' Politecnica delle Marche (I), Dipartimento di Economia. [Downloadable!]
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  32. Graham Bird & Alistair Milne, 2003. "Debt Relief for Low Income Countries: Is it Effective and Efficient?," The World Economy, Blackwell Publishing, vol. 26(1), pages 43-59, January. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Johansson, Pernilla, 2008. "Debt Relief, Investment and Growth," Working Papers 2008:11, Lund University, Department of Economics. [Downloadable!]
  2. Presbitero, Andrea F., 2008. "Debt Relief Effectiveness and Institution Building," MPRA Paper 12597, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
    Other versions:
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