IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The Internal-External Debt Ratio and Economic Growth

  • Tilemahos Efthimiadis


    (Research Fellow, Centre of Planning and Economic Research, Athens, Greece)

  • Panagiotis Tsintzos


    (Lecturer (elected), Dept. of Int. Economic Relations and Development, Democritus Univ. of Thrace)

In this paper we examine the effects of the ratio of internal to external public debt on a country's economic growth. These effects are examined through a competitive, decentralized model of endogenous economic growth, which relies on public investments. Our findings show that as the internal-external public debt ratio increases, the public to private capital ratio increases which in turn positively affects the long run economic growth rate. The main conclusion of this paper is that the out flow of domestic capital which is needed to service external debt has unfavorable repercussions on an economy's long run steady state growth rate.

If 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.

File URL:
Download Restriction: no

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 1 ()
Pages: 941-951

in new window

Handle: RePEc:ebl:ecbull:eb-11-00632
Contact details of provider:

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.:

as in new window
  1. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
  2. Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2007. "Home bias in global bond and equity markets: The role of real exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 631-655, June.
  3. Andreas Irmen & Johanna Kuehnel, 2008. "Productive Government Expenditure and Economic Growth," CESifo Working Paper Series 2314, CESifo Group Munich.
  4. Ugo Panizza, 2008. "Domestic And External Public Debt In Developing Countries," UNCTAD Discussion Papers 188, United Nations Conference on Trade and Development.
  5. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002. "External Debt and Growth," IMF Working Papers 02/69, International Monetary Fund.
  6. P.C. Afxentiou & A. Serletis, 1999. "The Foreign Indebtedness of Moderately and Severely-Indebted Developing Countries," South African Journal of Economics, Economic Society of South Africa, vol. 67(1), pages 44-51, 03.
  7. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  8. Jeffrey Sachs, 1986. "Managing the LDC Debt Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 397-440.
  9. Deshpande, Ashwini, 1997. "The debt overhang and the disincentive to invest," Journal of Development Economics, Elsevier, vol. 52(1), pages 169-187, February.
  10. Currie, Elizabeth & Dethier, Jean-Jacques & Togo, Eriko, 2003. "Institutional arrangements for public debt management," Policy Research Working Paper Series 3021, The World Bank.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  12. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  13. Bert Hofman & Helmut Reisen, 1991. "Some evidence on debt-related determinants of investment and consumption in heavily indebted countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(2), pages 281-299, June.
  14. Sawada, Yasuyuki, 1994. "Are the heavily indebted countries solvent?: Tests of intertemporal borrowing constraints," Journal of Development Economics, Elsevier, vol. 45(2), pages 325-337, December.
  15. Rolf Maier, 2005. "External Debt and Pro-Poor Growth," Macroeconomics 0504031, EconWPA.
  16. Savvides, Andreas, 1992. "Investment Slowdown in Developing Countries during the 1980s: Debt Overhang or Foreign Capital Inflows?," Kyklos, Wiley Blackwell, vol. 45(3), pages 363-78.
  17. Stefan Dietrich Josten, 2000. "Public Debt in an Endogenous Growth Model of Perpetual Youth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(2), pages 197-, March.
  18. Ghosh, Sugata & Mourmouras, Iannis A., 2004. "Endogenous growth, welfare and budgetary regimes," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 623-635, December.
  19. repec:tpr:qjecon:v:107:y:1992:i:4:p:1243-59 is not listed on IDEAS
  20. Saint-Paul, G., 1991. "Fiscal Policy In An Endogenous Growth Model," DELTA Working Papers 91-04, DELTA (Ecole normale supérieure).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00632. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.