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A Critical Review of External Debt and Economic Growth Relationship: A Lesson for Indebtedness Countries

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  • Erdal Karagol

    (Balýkesir Universitesi Bandirma Iktisadi Idari Bilimler Fakultesi Iktisat Bolumu)

Abstract

The purpose of this paper is to review existing empirical studies of external debt and economic growth relationship. The decline in investment and growth performance of the highly indebted countries in the past three decades is frequently attributed, at least to some extent, to the burden of their foreign debt, a phenomenon which has been recognised as debt overhang. Empirical results indicate that it is difficult to say whether external debt has a negative or positive effect on economic growth. It is also improper to make any type of generalizations of the potential relationship between economic growth and external debt. Thus, it is necessary to consider the case of each country separately.

Suggested Citation

  • Erdal Karagol, 2004. "A Critical Review of External Debt and Economic Growth Relationship: A Lesson for Indebtedness Countries," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 4(1), pages 69-78.
    • Handle: RePEc:ege:journl:v:4:y:2004:i:1:p:69-78
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    References listed on IDEAS

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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