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The debt-growth nexus in poor countries: a reassessment

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  • Presbitero, Andrea F.

Abstract

This paper investigates the relationship between external indebtedness and economic growth, with a particular attention to LICs, for which the theoretical arguments of debt overhang and liquidity constraint have to be reconsidered. The estimation of a growth model, with a panel of 121 developing countries, supports a negative and linear relationship between past values of the NPV of external public debt and current economic growth. This could be due to the ?extended debt overhang?, according to which a large indebtedness leads to misallocation of capital and discourage long-term investment and structural reforms. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2007-17.

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Date of creation: 2007
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Handle: RePEc:zbw:ifwedp:5531

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Keywords: External Debt; HIPC; Debt Relief; Economic Growth;

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Citations

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Cited by:
  1. Johansson, Pernilla, 2008. "Debt Relief, Investment and Growth," Working Papers 2008:11, Lund University, Department of Economics.
  2. Samuel W. Malone, 2011. "Sovereign indebtedness, default, and gambling for redemption," Oxford Economic Papers, Oxford University Press, vol. 63(2), pages 331-354, April.
  3. Donald Robertson & Vasilis Sarafidis, 2013. "IV Estimation of Panels with Factor Residuals," Cambridge Working Papers in Economics 1321, Faculty of Economics, University of Cambridge.
  4. Andrea F. Presbitero, 2009. "Debt-Relief Effectiveness and Institution-Building," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 529-559, 09.
  5. Andrea F Presbitero, 2012. "Total Public Debt and Growth in Developing Countries," The European Journal of Development Research, Palgrave Macmillan, vol. 24(4), pages 606-626, September.
  6. Wamboye, Evelyn, 2012. "External debt, trade and FDI on economic growth of least developed countries," MPRA Paper 39031, University Library of Munich, Germany.
  7. 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.
  8. Markus Eberhardt & Andrea Filippo Presbitero, 2013. "This Time They're Different: Heterogeneity;and Nonlinearity in the Relationship;between Debt and Growth," Mo.Fi.R. Working Papers 92, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  9. 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.
  10. Kathavate, Jay, 2013. "Direct & Indirect Effects of Aid Volatility on Growth: Do Stronger Institutions Play a Role?," MPRA Paper 45187, University Library of Munich, Germany.
  11. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
  12. Prokop, Jacek & Baranowska-Prokop, Ewa, 2012. "The Efficiency of Foreign Borrowing: The Case of Poland," MPRA Paper 44976, University Library of Munich, Germany.
  13. Prokop, Jacek, 2012. "Bargaining over debt rescheduling," MPRA Paper 44315, University Library of Munich, Germany.
  14. 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.
  15. Johansson, Pernilla, 2010. "Debt Relief, Investment and Growth," World Development, Elsevier, vol. 38(9), pages 1204-1216, September.

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