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The Impact of External Debt on Economic Growth:Empirical Evidence from Highly Indebted Poor Countries

Author

Listed:
  • Abu Siddique

    (Business School, University of Western Australia)

  • E A Selvanathan

    (Griffith Business School, Griffith University)

  • Saroja Selvanathan

    (Griffith Business School, Griffith University)

Abstract

During the 1970s and 1980s, the external debt levels of poor countries rose to a level constituting a ‘debt crisis.’ The main source of the supply of external debt was the surplus revenue generated by the OPEC through significant increases in the price of oil during the 1970s. Unfortunately, many of the countries failed to use the external debt wisely and prudently. When the revenue from oil sales started to decline due to low oil prices during the 1980s, heavily indebted countries experienced difficulty servicing the debt. This paper analyses the extent to which the external debt burden impacts on a country’s gross domestic product (GDP) using data from HIPC over the period 1970-2007. The findings of empirical analysis suggest that, in the short-run as well as in the long-run, a reduction in debt stock would have significantly increased the growth performance of the indebted nations.

Suggested Citation

  • Abu Siddique & E A Selvanathan & Saroja Selvanathan, 2015. "The Impact of External Debt on Economic Growth:Empirical Evidence from Highly Indebted Poor Countries," Economics Discussion / Working Papers 15-10, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:15-10
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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2015/15.10%20Siddique%2C%20A.%20et%20al%20-%20THE%20IMPACT%20OF%20EXTERNAL%20DEBT%20ON%20ECONOMIC%20GROWTH-EMPIRICAL%20EVIDENCE%20FROM%20HIGHLY%20INDEBTED%20POOR%20COUNTRIES%20.pdf
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    Citations

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    Cited by:

    1. Gameli Adika, 2022. "Sustaining Economic Growth in COMESA: Challenges and Prospects," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 301-311, January.
    2. Matuka, Adelajda & Asafo, Shuffield Seyram, 2018. "External Debt and Economic Growth in Ghana: A Co-integration and a Vector Error Correction Analysis," MPRA Paper 90463, University Library of Munich, Germany, revised 04 Nov 2018.
    3. Nursini Nursini, 2017. "Effect of Fiscal Policy and Trade Openness on Economic Growth in Indonesia: 1990-2015," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 358-364.
    4. Callistus Tabansi Okeke & Chinwe Ann Anisiobi & Chinwe Monica Madueke, 2023. "Public Debt and Economic Growth: Empirical Evidence from Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(3), pages 705-718, March.
    5. Furqan Sikandar & Vasilii Erokhin & Hongshu Wang & Shafiqur Rehman & Anna Ivolga, 2021. "The Impact of Foreign Capital Inflows on Agriculture Development and Poverty Reduction: Panel Data Analysis for Developing Countries," Sustainability, MDPI, vol. 13(6), pages 1-22, March.
    6. Torki M. Al-Fawwaz, 2016. "Determinants of External Debt in Jordan: An Empirical Study (1990¨C2014)," International Business Research, Canadian Center of Science and Education, vol. 9(7), pages 116-123, July.
    7. Yilmaz BAYAR & Mahmut Unsal SASMAZ, 2019. "Foreign borrowing, foreign direct investment inflows and economic growth in European Union transition economies," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10, pages 107-125, December.
    8. Muhammad Shahid & Mahmood Shah & Bibi Aisha Sadiqa, 2019. "Foreign Debt and Debt Servicing Relief Effect Implications in Pakistan: A Poverty Reduction Strategy," Global Economics Review, Humanity Only, vol. 4(4), pages 23-34, December.

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