IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/116328.html
   My bibliography  Save this paper

Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries

Author

Listed:
  • Ali, Amjad

Abstract

The current study has examined the link between exchange rate volatility, financial stability, foreign debt, and economic growth in a few South Asian nations from 1985 to 2020. The findings show that labor force participation has a positive and significant link with economic growth. Financial stability has a positive and significant influence on economic growth. Physical capital has a positive and significant relationship with economic growth because South Asian countries have labor as a larger factor of production. Foreign debt has a negative and insignificant influence on the level of growth, whereas, exchange rate volatility has a positive and significant relationship with economic growth. The overall results conclude that exchange rate volatility, financial stability, foreign debt, physical capital availability, and labor force participation are playing important roles in determining economic growth in the case of selected South Asian countries.

Suggested Citation

  • Ali, Amjad, 2022. "Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries," MPRA Paper 116328, University Library of Munich, Germany, revised 2022.
    • Handle: RePEc:pra:mprapa:116328
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/116328/1/MPRA_paper_116328.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Ali, Amjad & Ahmad, Khalil, 2014. "The Impact of Socio-Economic Factors on Life Expectancy for Sultanate of Oman: An Empirical Analysis," MPRA Paper 82500, University Library of Munich, Germany, revised 2014.
    3. Gault, Fred, 2018. "Defining and measuring innovation in all sectors of the economy," Research Policy, Elsevier, vol. 47(3), pages 617-622.
    4. Amjad Ali & Ismail Senturk, 2019. "Justifying the Impact of Economic Deprivation, Maternal Status and Health infrastructure on Under-Five Child Mortality in Pakistan: An Empirical Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 8(3), pages 140-154, September.
    5. Ä°smail Åženturk & Amjad Ali, 2022. "The Relationship between Institutional Quality and Welfare: Panel-SUR Analysis on BRICS-T Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(1), pages 45-52, March.
    6. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    7. Amjad Ali & Marc Audi, 2016. "The Impact of Income Inequality, Environmental Degradation and Globalization on Life Expectancy in Pakistan: An Empirical Analysis," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(4), pages 182-193, April.
    8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    9. Amjad Ali & Marc Audi, 2018. "Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 7(1), pages 30-39, March.
    10. Andrea F Presbitero, 2012. "Total Public Debt and Growth in Developing Countries," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 24(4), pages 606-626, September.
    11. Creel, Jérôme & Hubert, Paul & Labondance, Fabien, 2015. "Financial stability and economic performance," Economic Modelling, Elsevier, vol. 48(C), pages 25-40.
    12. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    13. Hyman P. Minsky, 1991. "Financial Crises: Systemic or Idiosyncratic," Economics Working Paper Archive wp_51, Levy Economics Institute.
    14. Antonio Ciccone & Marek Jarociński, 2010. "Determinants of Economic Growth: Will Data Tell?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 222-246, October.
    15. Checherita-Westphal, Cristina & Rother, Philipp, 2012. "The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area," European Economic Review, Elsevier, vol. 56(7), pages 1392-1405.
    16. Audi, Marc & Ali, Amjad & Roussel, Yannick, 2021. "Measuring the Tax Buoyancy: Empirics from South Asian Association for Regional Cooperation (SAARC)," MPRA Paper 109567, University Library of Munich, Germany.
    17. Audi, Marc & Ali, Amjad & Fayad Hamadeh, Hani, 2022. "Nexus among innovations, financial development and economic growth in developing countries," MPRA Paper 115220, University Library of Munich, Germany.
    18. Delano S Villanueva & Roberto S Mariano & Diwa C Guinigundo & Abbas Mirakhor, 2023. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," World Scientific Book Chapters, in: Economic Adjustment and Growth Theory and Practice, chapter 2, pages 10-43, World Scientific Publishing Co. Pte. Ltd..
    19. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
    20. Madhusudan Ghosh, 2012. "Regional Economic Growth and Inequality in India during the Pre- and Post-reform Periods," Oxford Development Studies, Taylor & Francis Journals, vol. 40(2), pages 190-212, June.
    21. Mr. N. F. R. Crafts, 2000. "Globalization and Growth in the Twentieth Century," IMF Working Papers 2000/044, International Monetary Fund.
    22. Marc Audi & Amjad Ali, 2023. "Public Policy and Economic Misery Nexus: A Comparative Analysis of Developed and Developing World," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 56-73, May.
    23. Edward F. Denison, 1962. "Education, Economic Growth, and Gaps in Information," NBER Chapters, in: Investment in Human Beings, pages 124-128, National Bureau of Economic Research, Inc.
    24. Anaman, Kwabena A., 2004. "Determinants of economic growth in Brunei Darussalam," Journal of Asian Economics, Elsevier, vol. 15(4), pages 777-796, August.
    25. Nguyen, Hoa & Faff, Robert, 2006. "Foreign debt and financial hedging: Evidence from Australia," International Review of Economics & Finance, Elsevier, vol. 15(2), pages 184-201.
    26. Aliyu, Shehu Usman Rano, 2009. "Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation," MPRA Paper 16319, University Library of Munich, Germany, revised 10 Jun 2009.
    27. Mr. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 2004/187, International Monetary Fund.
    28. Edward F. Denison, 1962. "Education, Economic Growth, and Gaps in Information," Journal of Political Economy, University of Chicago Press, vol. 70(5), pages 124-124.
    29. Hamilton, James D. & Monteagudo, Josefina, 1998. "The augmented Solow model and the productivity slowdown," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 495-509, October.
    30. Senay Acikgoz & Merter Mert, 2010. "The Endogeneity of the Natural Rate of Growth: An Application to Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(4), pages 447-469, December.
    31. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
    32. Cihák, Martin & Schaeck, Klaus, 2010. "How well do aggregate prudential ratios identify banking system problems?," Journal of Financial Stability, Elsevier, vol. 6(3), pages 130-144, September.
    33. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2018. "Public Debt and Economic Growth: Further Evidence for the Euro Area," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 68(2), pages 209-229, June.
    34. Jérôme Creel & Paul Hubert & Fabien Labondance, 2015. "Financial stability and economic performance in Europe," Post-Print hal-03459729, HAL.
    35. Raymond W. Goldsmith, 1959. "The Comparative Study of Economic Growth and Structure," NBER Books, National Bureau of Economic Research, Inc, number unkn59-1.
    36. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    37. Ali, Amjad & Zulfiqar, Kalsoom, 2018. "An Assessment of Association between Natural Resources Agglomeration and Unemployment in Pakistan," MPRA Paper 87968, University Library of Munich, Germany.
    38. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    39. John C. Anyanwu, 2014. "Factors Affecting Economic Growth in Africa: Are There any Lessons from China?," African Development Review, African Development Bank, vol. 26(3), pages 468-493, September.
    40. Paola Bongini & Małgorzata Iwanicz-Drozdowska & Paweł Smaga & Bartosz Witkowski, 2017. "Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries," Sustainability, MDPI, vol. 9(3), pages 1-25, March.
    41. Benos, Nikos & Zotou, Stefania, 2014. "Education and Economic Growth: A Meta-Regression Analysis," World Development, Elsevier, vol. 64(C), pages 669-689.
    42. Levine, Ross & Zervos, Sara, 1998. "Capital Control Liberalization and Stock Market Development," World Development, Elsevier, vol. 26(7), pages 1169-1183, July.
    43. Asheghian Parviz, 2009. "Determinants of Economic Growth in Japan: The Role of Foreign Direct Investment," Global Economy Journal, De Gruyter, vol. 9(3), pages 1-11, September.
    44. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    45. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    46. repec:hal:spmain:info:hdl:2441/5euk7d0f8t81prfu1k2sspdcok is not listed on IDEAS
    47. Berg, Andrew & Ostry, Jonathan D. & Zettelmeyer, Jeromin, 2012. "What makes growth sustained?," Journal of Development Economics, Elsevier, vol. 98(2), pages 149-166.
    48. Sulehri, Fiaz Ahmad & Ali, Amjad, 2020. "Impact of Political Uncertainty on Pakistan Stock Exchange (1990-1999): An Event Study Approach," MPRA Paper 104623, University Library of Munich, Germany.
    49. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    50. Felix Rioja & Neven Valev, 2004. "Finance and the Sources of Growth at Various Stages of Economic Development," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 127-140, January.
    51. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
    52. Chen, Baizhu & Feng, Yi, 2000. "Determinants of economic growth in China: Private enterprise, education, and openness," China Economic Review, Elsevier, vol. 11(1), pages 1-15.
    53. M. J. Freire-Seren, 2002. "On the relationship between human capital accumulation and economic growth," Applied Economics Letters, Taylor & Francis Journals, vol. 9(12), pages 805-808.
    54. Hsu, Po-Hsuan & Tian, Xuan & Xu, Yan, 2014. "Financial development and innovation: Cross-country evidence," Journal of Financial Economics, Elsevier, vol. 112(1), pages 116-135.
    55. Kumar, Ronald Ravinesh, 2013. "Remittances and economic growth: A study of Guyana," Economic Systems, Elsevier, vol. 37(3), pages 462-472.
    56. Ali, Amjad & Ehsan, Rehan & Audi, Marc & Hamadeh, Hani Fayad, 2022. "Does Globalization Promote Financial Integration in South Asian Economies? Unveiling the Role of Monetary and Fiscal Performance in Internationalization," MPRA Paper 115304, University Library of Munich, Germany.
    57. Homi Kharas, 1984. "The Long-Run Creditworthiness of Developing Countries: Theory and Practice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 415-439.
    58. Ali, Amjad, 2022. "Financial Liberalization, Institutional Quality and Economic Growth Nexus: Panel Analysis of African Countries," MPRA Paper 116101, University Library of Munich, Germany.
    59. Ali, Amjad, 2022. "Determining Pakistan's Financial Dependency: The Role of Financial Globalization and Corruption," MPRA Paper 116097, University Library of Munich, Germany.
    60. Dollar, David, 1992. "Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985," Economic Development and Cultural Change, University of Chicago Press, vol. 40(3), pages 523-544, April.
    61. Lordina P. Manu & Charles K.D. Adjasi & Joshua Abor & Simon K. Harvey, 2011. "Financial stability and economic growth: a cross-country study," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(2), pages 121-138.
    62. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 36-57, February.
    63. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    64. John Inekwe, 2015. "The Contribution of R&D Expenditure to Economic Growth in Developing Economies," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(3), pages 727-745, December.
    65. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    66. Stanley Fischer, 1992. "Macroeconomic Stability and Growth," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(87), pages 171-186.
    67. Calderón, César & Fuentes, J. Rodrigo, 2013. "Government Debt and Economic Growth," IDB Publications (Working Papers) 4641, Inter-American Development Bank.
    68. HOLLIS B. CHENERY & ARTHUR MACEwAN, 1966. "Optimal Patterns of Growth and Aid The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 6(2), pages 209-242.
    69. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    70. repec:fth:bosecd:110 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ismail Senturk & Fiaz Ahmad Sulehri & Syeda Mehak Ali, 2022. "Financial Development and Innovation Led-Growth: A Case of Selected Developing Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 81-97, September.
    2. Chirwa Themba G. & Odhiambo Nicholas M., 2016. "Macroeconomic Determinants of Economic Growth: A Review of International Literature," South East European Journal of Economics and Business, Sciendo, vol. 11(2), pages 33-47, December.
    3. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    4. Audi, Marc & Ali, Amjad & Fayad Hamadeh, Hani, 2022. "Nexus among innovations, financial development and economic growth in developing countries," MPRA Paper 115220, University Library of Munich, Germany.
    5. Ali, Amjad, 2022. "Financial Liberalization, Institutional Quality and Economic Growth Nexus: Panel Analysis of African Countries," MPRA Paper 116329, University Library of Munich, Germany, revised 2022.
    6. Themba G. Chirwa & Nicholas M. Odhiambo, 2017. "Sources of Economic Growth in Zambia: An Empirical Investigation," Global Business Review, International Management Institute, vol. 18(2), pages 275-290, April.
    7. Themba G Chirwa & NM Odhiambo, 2019. "An Empirical Test Of Exogenous Growth Models: Evidence From Three Southern African Countries," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(220), pages 7-38, January –.
    8. Ali, Amjad, 2022. "Determining Pakistan's Financial Dependency: The Role of Financial Globalization and Corruption," MPRA Paper 116097, University Library of Munich, Germany.
    9. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    10. Chirwa, Themba G & Odhiambo, Nicholas M., 2018. "Electricity consumption and economic growth: New evidence from twelve countries," Working Papers 23508, University of South Africa, Department of Economics.
    11. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, March.
    12. Bernard Njindan Iyke, 2018. "The real effect of currency misalignment on productivity growth: evidence from middle-income economies," Empirical Economics, Springer, vol. 55(4), pages 1637-1659, December.
    13. Alessio Ciarlone, 2019. "The relationship between financial development and growth: the case of emerging Europe," Questioni di Economia e Finanza (Occasional Papers) 521, Bank of Italy, Economic Research and International Relations Area.
    14. Lenkei, Balint & Mustafa, Ghulam & Vecchi, Michela, 2018. "Growth in emerging economies: Is there a role for education?," Economic Modelling, Elsevier, vol. 73(C), pages 240-253.
    15. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    16. Amjad Ali & Zohaib Ul Hasan & Qasim Abbasi & Fiaz Ahmad Sulehri, 2023. "Business Or Politics: Exploring The Determinants Of Policy Mix In South Asia," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 114-123.
    17. Fiaz Ahmad Sulehri & Amjad Ali, 2024. "Nexus among Regulatory Framework, Economic Growth and Sustainable Development: Insights from Structural Equation Modeling Approach," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 110-117.
    18. Riaz, Kainat & Siddique, Hafiz Muhammad Abubakar & Audi, Marc & Sumaira, Sumaira, 2024. "Impact of Financial Development on Export Performance: Evidence from South Asia," MPRA Paper 122474, University Library of Munich, Germany.
    19. Fiaz Ahmad Sulehri & Saba Sharif, 2022. "The Impact of Firm Sustainability on Firm Growth: Evidence from USA," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(2), pages 1-15, August.
    20. Diego Romero‐Avila, 2006. "Fiscal Policies And Output In The Long Run: A Panel Cointegration Approach Applied To The Oecd," Manchester School, University of Manchester, vol. 74(3), pages 360-388, June.

    More about this item

    Keywords

    Economic growth; Exchange rate volatility; Foreign debt; Financial stability;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    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:pra:mprapa:116328. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.