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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

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

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

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  4. Seema Jayachandran, 2004. "Odious Debt," UCLA Economics Online Papers 298, UCLA Department of Economics. [Downloadable!]
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  10. Presbitero, Andrea F., 2007. "The debt-growth nexus in poor countries : a reassessment," Economics Discussion Papers 2007-17, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
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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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  25. Marta Ruiz-Arranz & Tito Cordella & Luca Antonio Ricci, 2005. "Debt Overhang or Debt Irrelevance? Revisiting the Debt Growth Link," IMF Working Papers 05/223, International Monetary Fund.
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  28. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group. [Downloadable!]
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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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