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Debt Accumulation and Economic Growth: Empirical Evidence from Pakistan Economy

Author

Listed:
  • Zeshan Arshad

    (Department Of Economics. GC Women University Sialkot, Pakistan.)

  • Sana Aslam

    (Department Of Economics. GC Women University Sialkot, Pakistan.)

  • Mehak Fatima

    (Department Of Economics. GC Women University Sialkot, Pakistan.)

  • Ayesha Muzaffar

    (Department Of Economics. GC Women University Sialkot, Pakistan.)

Abstract

Purpose: The study analyzes the contribution of external debt on the economic growth of Pakistan. To investigate whether the external debt has contributed to the economic growth in the long run, extended Solow growth model is used. Methodology: To test model Johnson co-integration is applied on time series data for the years1970-2014. ADF is also being applied to check the stationarity. Results disclosed, there exist negative relation between external debt and economic growth of Pakistan. With the justification of Nigerian economy in which ordinary least square method is used to establish a simple relationship between variables under study, Granger Causality test was also applied to check relation between GDP, external debt and domestic debt. Findings: Results showed that external debt has a negative impact on growth and domestic debt has a positive impact on economic growth. Domestic debt, if managed can lead to higher level of growth. Recommendations: Focus should be made on efforts to manage the debt by using them in productive activities so that the level of output will increase in the country.

Suggested Citation

  • Zeshan Arshad & Sana Aslam & Mehak Fatima & Ayesha Muzaffar, 2015. "Debt Accumulation and Economic Growth: Empirical Evidence from Pakistan Economy," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(8), pages 405-410, August.
  • Handle: RePEc:ijr:journl:v:3:y:2015:i:8:p:405-410
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    More about this item

    Keywords

    External debt; Economic growth;

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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