The Debt-Growth Nexus: a Dynamic Panel Data Estimation
This paper investigates the relationship between external debt and economic growth in developing countries. Notwithstanding a general agreement on theory, empirical evidence is not conclusive and lacks of robustness. This contribution aims to shed more light on the relationship between external debt and economic growth and to draw some policy implication for debt relief. This work highlights the critical role of econometric and methodological issues. The results for a panel of 69 developing countries over the period 1977-2002 support a negative linear relationship between external debt and economic growth, and between debt service and investment. These effects seem to be stronger in the Low-Income Countries than in the overall sample, raising concern about the dramatic effect that debt has on economic performance in the world's poorest countries. Eventually, external debt impairs economic growth through the liquidity constraint, the creation of macroeconomic instability, a reduced total factor productivity, and its effect on macroeconomic policies and institutional development.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Krugman, Paul, 1988.
"Financing vs. forgiving a debt overhang,"
Journal of Development Economics,
Elsevier, vol. 29(3), pages 253-268, November.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004.
"Capital Accumulation and Growth: A New Look at the Empirical Evidence,"
2004-W08, Economics Group, Nuffield College, University of Oxford.
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2010. "Capital accumulation and growth: a new look at the empirical evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1073-1099, November/.
- Bond, Steve & Asli, Leblebicioglu & Schiantarelli, Fabio, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," IZA Discussion Papers 1174, Institute for the Study of Labor (IZA).
- Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," Boston College Working Papers in Economics 591, Boston College Department of Economics, revised 02 Aug 2007.
- 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 135-158, May.
- Anke E. Hoeffler, 2000. "The Augmented Solow Model and the African Growth Debate," CID Working Papers 36, Center for International Development at Harvard University.
- Helene Poirson Ward & Luca A Ricci & Catherine A Pattillo, 2002.
"External Debt and Growth,"
IMF Working Papers
- Easterly, William*Loayza, Norman*Montiel, Peter, 1997.
"Has Latin America's post-reform growth been disappointing?,"
Policy Research Working Paper Series
1708, The World Bank.
- Easterly, William & Loayza, Norman & Montiel, Peter, 1997. "Has Latin America's post-reform growth been disappointing?," Journal of International Economics, Elsevier, vol. 43(3-4), pages 287-311, November.
- Janvier D. Nkurunziza & Robert H. Bates, 2003.
"Political Institutions and Economic Growth in Africa,"
CSAE Working Paper Series
2003-03, Centre for the Study of African Economies, University of Oxford.
- Janvier Nkurunziza & Robert Bates, 2004. "Political Institutions And Economic Growth In Africa," Development and Comp Systems 0409028, EconWPA.
- Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
- Kiviet, Jan F., 1995.
"On bias, inconsistency, and efficiency of various estimators in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, "undated". "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
- Gupta, Sanjeev & Clements, Benedict & Baldacci, Emanuele & Mulas-Granados, Carlos, 2005. "Fiscal policy, expenditure composition, and growth in low-income countries," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 441-463, April.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:mul:jqat1f:doi:10.1427/24579:y:2006:i:3:p:417-462. 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: ()
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.