IDEAS home Printed from
   My bibliography  Save this paper

Capital Accumulation,External Indebtedness and Macroeconomic Performance of EmergingCountries


  • Felissa Silva de Sousa Marques
  • José Luis Oreiro
  • MarcosRocha


This paper aims at presenting a non-linear post-keynesian growth model to evaluate at theoretical and empirical level the relationship between external indebtedness and economic growth in emerging countries. For this intent, it is presented a post-keynesian endogenous growth model in which: i) desired rate of capital accumulation is supposed to be a non-linear function of external indebtedness as share of capital stock; ii) there is an endogenous country risk premium, which is supposed to be an increasing (linear) function of the external indebtedness (as a share of capital stock); iii) there is a fixed exchange rate regime and perfect capital mobility in the sense of Mundell and Fleming. The main theoretical result of the model is the existence of two long-run equilibrium positions, one of them with a high level of external indebtedness (as a ratio of capital stock) and a low profit rate and the other with a low level of external indebtedness and a high profit rate. This means that an “excessive” external indebtedness can result in a stagnant growth due to its negative effect over the rate of profit. To test the effects of external indebtedness over the rate of economic growth in emerging economies, it is estimated a dynamic panel which evaluates if external debt has an effective negative impact over economic growth of emerging countries. The empirical test of demand-led growth equations with a dynamic panel for 55 emerging countries confirms the potential negative effects of external debt over the long-run rate of growth of the countries in the sample. Moreover, it was detected a hump-shaped relation between external debt and economic growth for the countries in the sample, but the positive effect of external debt over economic growth will only occur for negative values of this variable. This means that, according to the empirical model, any positive level of external debt is harmful for economic growth of emerging countries. Economic growth can be maximized only
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Felissa Silva de Sousa Marques & José Luis Oreiro & MarcosRocha, 2011. "Capital Accumulation,External Indebtedness and Macroeconomic Performance of EmergingCountries," Anais do XXXVII Encontro Nacional de Economia [Proceedings of the 37th Brazilian Economics Meeting] 108, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  • Handle: RePEc:anp:en2009:108

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    2. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-115, March.
    3. Paulo Gala, 2008. "Real exchange rate levels and economic development: theoretical analysis and econometric evidence," Cambridge Journal of Economics, Oxford University Press, vol. 32(2), pages 273-288, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Köhler, Karsten, 2016. "Currency devaluations, aggregate demand, and debt dynamics in an economy with foreign currency liabilities," IPE Working Papers 78/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anp:en2009:108. 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: (Rodrigo Zadra Armond). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.