The study also analyzed the risk and costs associated with public debt in the countries. Specifically, the study tries to answer the question whether external debt and debt servicing have any significant effect on Economic Growth. JEL classification: C22, F33, H63, O40, O52 Keywords: Public debt, economic growth, bounds testing, euro area, peripheral euro area countries, central euro area countries. This empirical analysis confirms the lack of consensus on the external debt-growth relationship External debt has no significant effect on Nigeria economic growth and development Debt Service Payment, External reserve resource and interest rate has no significant effect on Nigeria economic growth and development The rejection of the null hypothesis means the acceptance of the alternative hypothesis. The research said that high levels of debt slowed down the economic growth. 2 Abstract: This paper examines the determinants of economic growth for Pakistan, the impact of domestic debt and external debt on the economic growth of Pakistan separately over period of 1980 to 2010, using Ordinary Least Square (OLS) approach to Cointegration, Unit Root Testing, Serial Correlation Testing, test for checking Heteroskedasticity and CUSUM test of stability. Several policy implications emerge from the study. The model built for the study proxy gross domestic product as the endogenous variable measuring economic growth as a function of external debt, ratio of external debt to export, inflation, and exchange rate proxy as the exogenous variables. real exchange rate, real interest rate and inflation. You are currently offline. Threshold estimation is conducted on data for 39 developing countries over 1984–2010. Among recent studies, Clements et al. This paper aims to examine the threshold effect of Government’s external debt on economic growth in a group of 10 emerging countries. external debt on GDP in the short-run as well as in the long-run. It is shown that the estimates of long-run effects of debt accumulation on GDP growth are robust to feedbacks from growth to debt. This paper estimates empirically the impact of external debt on economic growth in Ghana to determine the existence of a ‘debt overhang' and/or 'crowding out' effects for the period 1970 to 1999. As indicated by Cohen (1993), the relati. In general, external debt may affect economic growth in two ways:- a. An average figure for External debt of 50% of the GDP is considered as the threshold level. According to Ajayi (1991), the debt management systems also have a direct macro economic impact on the borrowing countries. 1 (March 2018), pp. While high levels of public debt are likely to be deleterious for growth, this negative effect is non-linear and is observed only above a certain level of debt. The study used panel data for the period 1981 to 2014. The simultaneous attainment of sustainable levels of economic growth and external debt appear difficult at the moment and could remain elusive if aggressive measures are not undertaken. A number of other studies have looked at the impact of external debt on economic growth in developing economies. There are a lot of empirical studies which focus on developing countries and look at the relationship between external debt and economic growth. There has not been consensus on the impact of external debt on economic growth. A priori expectation was that external debt would bring about economic growth. The study examines the effect of external debt on the economic growth of Nigeria. 33, No. The results of these studies, however, are somewhat ambiguous with regard to the effect of external debt on economic growth. = External debt has no significant effect on Nigeria economic growth and development H o = Debt Service Payment, External reserve resource and interest rate has no significant effect on Nigeria economic growth and development The rejection of the null hypothesis means the acceptance of the alternative hypothesis. They conducted the analysis on a sample of 44 countries. Another contribution of this paper is in estimating the long-run effects of public debt build-up on economic growth, regardless of whether there exists a threshold effect from debt-to-GDP ratio on output growth. This paper reviewed the roles of debt management practices on sustainable economic growth and development with particular emphasis on Nigeria. By fitting a production function model to annual data for the period 1980-2011, the study examines the dynamic effect of debt service, capital stock and labour force on the economic growth of the country. Over emphasis on negative impact of debt will cause morbid fear of debt, resulting in debt avoidance when it would have stimulated the economy by bringing in the much needed capital for … Using a large panel data of 93 developing countries over the period 1969–1998, Pattillo and others (2002) find that the average impact of external debt on per capita GDP growth is negative for net present value of debt levels … Rahman et al. The data was analyzed Regarding the growth effect of public debt, conventional view argues that public debt positively affects economic growth in the short run by stimulating the aggregate demand (see for instance, Elmendorf & Mankiw, 1999).However, theoretical literature mostly points to a negative debt-growth link in the long run through different channels. Times series regression model has been used to determine the effect of public debt on economic growth in Kenya and data was analyzed using E-views 8. The study also analyzed the risk and costs associated with public debt in the countries. affect economic performance. The study used panel data for the period 1981 to 2014. correlations between debt and growth, and does not take into account other determinants of growth as well as issues such as reverse causality (i.e., low growth can lead to large public debt). %PDF-1.4 This study examines the effect of both public external and domestic debt on economic growth in Swaziland including variables such as; inflation and government expenditure to the model to avoid spuriousness of the results. This study is therefore an effort to determine the effect of Public Debt on Economic Growth in Kenya. 4 0 obj <>stream Results show that FDI‐induced growth is dependent on an external debt threshold. The work uses the methodology of group unit root test, auto-regressive distributed lag (ARDL) bounds testing, and co-integrating long-run tests for robust policy recommendations. Where: H o = Null Hypothesis 2. A theoretical model is developed to account for the influence of debt on the FDI–growth nexus. Impact of External Debt on Economic Growth: A Case Study of Tanzania Faraji Kasidi1 and A. Makame Said2 Abstract This study investigated the impact of external debt on economic growth of Tanzania for the period of 1990-2010. Some of these works are: Jonse (2002), Befekadu (1992) and Hailemariam (2011). Purpose: This paper examines the effect of external debt on economic growth in Sub-Saharan Africa (SSA) in view of an upsurge in the level of external debt in many countries on the continent. As a result, this study seeks to assess the effect of external debt on economic growth in Nigeria as well as provide further evidences on the impact of debt on the process of growth in Nigeria. (2003) find support for a non-linear relationship between external debt and economic growth using a panel dataset of 55 low-income countries over the time period 1970–1999. This study aimed at finding out the effect public debt on the level of private investment and economic growth in Kenya. The Role of Government Debt in Economic Growth António Afonso$, José Alves# September 2014 Abstract We study the effect of public debt on economic growth for annual and 5-year average growth rates, as well as the existence of non-linearity effects of debt on growth … Despite these efforts, private investments and economic growth have remained low. THE EFFECT OF EXTERNAL DEVT ON THE NIGERIA ECONOMIC GROWTH (1989-2010) CHAPTER ONE INTODUCTION 1.1 BACKGROUND OF THE STUDY The accumulation of external debt is a common phenomenon of the third World countries at the stage of economic growth and development where the supply of domestic savings is low, current account payment deficit is high and import of capital is … Taner Turan, Halit Yanıkkaya, External debt, growth and investment for developing countries: some evidence for the debt overhang hypothesis, Portuguese Economic Journal, 10.1007/s10258-020 … From the literature on debt overhang and its effects on growth it is evident that debt relief might have a stimulating effect on investment and economic growth. As discussed in Section 1, the results are inconclusive. between debt and economic growth, when public debt to GDP ratio exceeds 90 percent.Pattillo et al. Threshold estimation is conducted on data for 39 developing countries over 1984–2010. Overall, the theoretical literature favours the study of the effects of very high debt on the capital stock, growth, and risk, since it tends to point to a negative link between the public PDF | The study examines the effect of external debt on the economic growth of Nigeria. economic growth (debt overhang). External debt may be used to stimulate the In an IMF Working Paper, Pattillo . The authors estimated that the critical threshold turning point in the net present value of external debt is in the range Servicing a debt by export earnings may affect economic growth by depleting available income from social service activities. Debt servicing does not appear to affect growth adversely but has some crowding-out effects on private investment.Several policy implications emerge from the study. This study analyses the economic impact between foreign debt and economic growth in South Africa. The debt levels above 30–40% of the GDP start hindering per capita growth.Checherita-Westphal et … Nigeria particularly with respect to economic growth. Where: Ho = Null Hypothesis 2. These included Kenya, Tanzania, Uganda, and Rwanda. This study investigates the effect of the external debt burden on economic growth and development of Nigeria .It adopted regression analysis of OLS on secondary data sourced from CBN, Economical and Financial review, Business times, Financial Standard and relevant publication from Nigeria on variable like National Income, Debt Service Payment, External Reserves, Interest rate among others. This article seeks to determine the effect of the amount of public debt on the long-run economic growth of the Israeli economy, using data from the years 1983–2013. Despite its common use, the debt overhang hypothesis was not originally developed to analyse the effects of external debt on economic growth. This paper assesses the impact of external debt on growth in low-income countries and the channels through which these effects are realized. The negative effect of public debt on the growth of economy was confirmed in the empirical results of Schclarek (2004), Balassone et al. the effect of external debt on economic growth, where by GDP annual growth rate used as the dependent variable while external debt and debt service as the independent variables. The effect of external debt on domestic investment and economic growth of a country has remained questionable for theoretical thinkers, stakeholders and academics alike. 3. For This paper examines the effect of government debt on economic growth in Nigeria between 1986 and 2013 – using the ordinary least square method. (2003) find support for a non-linear relationship between external debt and economic growth using a panel dataset of 55 low-income countries over the time period 1970–1999. (2002) analyse the effect debt burden has on et al developing economies. By employing panel data of 10 countries for the period from 2005 to 2015, our empirical results indicate that the threshold of Government’s external debt to domestic product (GDP) ratio is 33.17%. the stock of external debt and growth. 1141-1157 Published by: Center for Economic Integration, Sejong University Stable URL: REFERENCES Linked references are available on JSTOR for this article:-reference#references_tab_contents You may need … The remaining part of the study is organized as follows: section two gives the literature review on external debt and economic growth. Since debt overhang exist when a country exceeds its repayment ability, it can be suggested that, expected debt service is an increasing function of country’s output level (Krugmanv1988; Sachs 1989). We used the ADF, PP and KPSS tests for unit roots and the Johansen-Juselius multivariate approach to cointegration to test for stationarity and a long-run relationship among variables. His study was based on a sample of 114 developing countries over the period 1980~2004. These debt payments reduce the amount available to invest in improving public services, which can help economic development. %���� ?����� �(���h)e�a�%�?k��Cȸ*,��2�Ƕݿz�������k��k�q��E���^��uJ�w�����=�yV���u:��
�6�݂:1Z_w=}96�ˆiJ?7]=i�3�d.~�q�b�&yw�1㡴�f*�\�}]�&��u-o�Ӥ�6�͘v�4We�4��1E�/*��* Od�,�fEW.�(���l���-46բ�poMمMr?���\^��^ɛ6�a>JF�. The study used time series data on external debt and economic performance. the effect of external debt on economic growth in ghana: an ardl approach by angela ackon (10701538) this long essay is submitted to the university of ghana, legon in partial fulfilment of the requirement for the award of master of science in development finance degree july, 2019 Some features of the site may not work correctly. This study is therefore an effort to determine the effect of Public Debt on Economic Growth in Kenya. impact of debt on economic growth. External Debt and Economic Growth: The Case of Emerging Economy Author(s): Sami Al Kharusi and Mbah Stella Ada Source: Journal of Economic Integration, Vol. The research is based on data obtained from 1980 to 2007 on external debt, private investment, foreign direct investment (FDI), gross domestic product (GDP) and Based on several affect economic performance. Our data allow us to look at the impact of household, non-financial corporate and government debt separately.1 Using variation across countries and over time, we examine the impact of the movement in debt on growth.2 Our results support the view that, beyond a certain level, debt is bad for growth. (2012) found bidirectional causality between economic growth and external debt … A theoretical model is developed to account for the influence of debt on the FDI–growth nexus. These included Kenya, Tanzania, Uganda, and Rwanda. Semantic Scholar is a free, AI-powered research tool for scientific literature, based at the Allen Institute for AI. Investment Slowdown in Developing Countries During the 1980s: Debt Overhang or Foreign Capital Inflows? The aim of this study was to estimate the effect of external public debt on economic growth in four East African countries. to avoid crowding out private investments and consequently promote economic growth. The study uses a linear regression model to analyse Kenyan data Among recent studies, Clements et al. The findings indicated a negative effect of external debt on … external public debt, economic growth, ARDL bound testing, debt overhang. external debt and domestic debt) and economic growth in Swaziland. x��}{�fWu�=w;�w���s/~}~�s�9�Gl0��` ��B�iC���D&QU�!PDJM�6�%}��HU�V%�j Ϋ8�ƀ�y5$�D�D����9{��[g��}�ڦ���Fg�w�{�����^��Y�ȋY���Ão����=�����}������#�ݢt����ó�.P�n�g���م�lf����gM?k�z��oo�a���A�Ȋ6�����EYTU��6�e�����y���������A�Ț6+���i^5����A�Ȳ2�)'N~*$��x�+�̪��?=��E�W=��KN���EW�]����ܧuYW-���\:�k�F�u�|��|zf�.�,�j�˥�r��MY�oK��֮.y�(��7�٢*��f��y�蚾k��;!��y�hڮ��/w��y������l�Կ���ϥ۩��EW�T�CQ-v�J#����s���vmm��/�r������is�i��߫l�ШMR�o�ǣ�p�|�n�7�7�+��l?(��-V��/��y��b��ϟ�گ�fѩ�n�t�h�_�M���Դ������av�e�\A��9_5�溒����O��e0���Ff\ʴxFH��jo^��ŭj�s�vuQ�S'_��̓�^dM3;�z��8��? Their findings contrast the finding of Checherita and Rother (2010) . The Relationship between External Debt and Economic Growth: A Brief Review In this section we briefly review the literature examining the impact of external debt on economic growth. 2014). The study used time series data on external debt and economic performance. The rest of the paper is organized as follows. The literature on the impact of external debt on economic growth has largely relied on the debt overhang view. The effects of external debt growth variables on the growth rates of the real GDP shares of agriculture, industry, and services are also analysed. Impact of the Public Debt Level on Economic Growth and Infl ation The authors Reinhart, Rogoff (2010a), in their studies on the basis of long-term historical data, analyze the correlation between the economic growth, infl ation and levels of government and the external debt. External debt is a vital source of public financing in developing countries and carries the potential to play a key role in promoting economic growth. The negative effect of public debt on the growth of economy was confirmed in the empirical results of Schclarek (2004), Balassone et al. (2011) estimate much lower threshold for the panel of 93 developing countries. Boboye and Ojo (2012) studied the effect of external debt on economic growth in Nigeria. We investigate the influence of external debt on the FDI–growth relationship. This study models external debt and economic growth nexus for policy analysis on public finance and public debt management. This implies that public debt can either have a positive or negative effect on economic growth (Mencinger et al. Specifically, the study tries to answer the question whether external debt and debt servicing have any significant effect on Economic Growth. I. I. ntroduction he relationship between external public debt and economic growth continues attracting the interest of policy makers and academicians. This study investigates the effect of the external debt burden on economic growth and development of Nigeria .It adopted regression analysis of OLS on secondary data sourced from CBN, Economical and Financial review, Business times, Financial Standard and relevant publication from Nigeria on variable like National Income, Debt Service Payment, External Reserves, Interest rate among … The study also employed Johansen Co-integration test in order to determine the long run relationship of variables. Two broad categories of effects of high debt regimes † Short-run effects capturing the resilience of the economy to shocks: o potential losses for the economy o time spent at the ZLB o role played by private deleveraging † Long-run effects on output and growth. The debt overhang and the disincentive to invest, The Federal Government Debts Impact on Economic Growth, Conceptual Issue in Monetary and Fiscal Policies Vol 1 Pg 96104 Adeyemo Public House , Akure, Economic Growth and Foreign Debt: A Case Study of Nigeria, Striking Diversily of Experience with Growth Episode and Poverty Changes, Unidirectional and Positive Causal Relationship between Foreign Debt service and GDP Growth, View 6 excerpts, cites background and results, View 3 excerpts, cites results and background, View 5 excerpts, cites background and methods, View 7 excerpts, cites methods and background, Umar Yar ’ adua ( Nov 26 , 2007 ) : Financial Standard Africa ’ s Re - Development Needs : A Nigeria Perspective, Central Bank of Nigeria, Economic and Financial Review Vol, By clicking accept or continuing to use the site, you agree to the terms outlined in our. Debt seems to be a problem if it passes a certain threshold. In the debt model effect of domestic debt and external debt on the real GDP of Kenya has been captured. This study investigates the effect of the external debt burden on economic growth and development of Nigeria .It adopted regression analysis of OLS on secondary data sourced from CBN, Economical and Financial review, Business times, Financial Standard and relevant publication from Nigeria on variable like National Income, Debt Service Payment, External Reserves, Interest rate among … The simultaneous attainment of sustainable levels of economic growth and external debt appear difficult at the moment and could remain elusive if aggressive measures are not undertaken. found that public debt has a negative impact on economic growth when the debt is more than 90% of the GDP. performance of EA member states, whilst its short-run effect may be positive depending on the country. Results show that FDI‐induced growth is dependent on an external debt threshold. Ordinary least square multiple regression technique was used. The study used time series data from 1980 to 2013. The aim of the study was to investigate the impact of external debt on economic growth. The data was analyzed Servicing external debt (paying debt interest payments) ceteris paribus, reduces GDP because the monetary payments flow out of the country. External Debt and Economic Growth in Jordan: The Threshold Effect Aktham Maghyereh Ghassan Omet & Fadwa Kalaji Faculty of Economics & Administrative Sciences The Hashemite University Jordan Abstract The Jordanian economy has a serious external debt problem. Another study by Calderón and Fuentes (2013) in Latin America revealed the negative impact of external debt on economic growth over the period 1970~2010. effect of external debt is stronger on the economic growth in comparison to domestic debt. the effect of public debt on economic growth in kenya submitted by: gladys musyoka d63/85656/2016 a research project submitted in partial fulfillment of the requirements for the award of the degree of masters in science (finance) to the school of business, university of nairobi november 2017 2. Information was generated extensively from literature, the Nigeria Central Bank and National Bureau of Statistic reports. In presence of high debt there is inefficient use of resources which was found to be the main reason for negative effect on growth. The aim of this study was to estimate the effect of external public debt on economic growth in four East African countries. Special attention is given to the indirect effects of external debt on growth via its impact on public investment. The study uses a linear regression model to analyse Kenyan data A number of researchers have examined the effect of external debt on economic growth since the beginning of the new millennium. Long run significant positive effect of external public debt stock on GDP growth have been found from this investigation. This has allowed boosting the debate on the impact of external debt on growth. Impact of External Debt on Economic Growth: A Case Study of Tanzania Faraji Kasidi1 and A. Makame Said2 Abstract This study investigated the impact of external debt on economic growth of Tanzania for the period of 1990-2010. Chart 11: Government debt-to-GDP growth in OECD countries, 1970 – 2011 28 Chart 12: Government debt-to-GDP ratios of selected countries, 1970 – 2014 29 Chart 13: Projections of Germany’s government debt-to-GDP ratio based on the Domar model 37 Chart 14: Government debt and economic growth, 1880 – … Borrowing, Domestic debt, Economic growth, Foreign debt, Public debt Abstract The study investigated the effect of public debts on economic growth of Nigeria for the period of thirty-eight (38) years, 1981 to 2018. Debt servicing does not appear to affect growth adversely but has some crowding-out effects on private investment. The finding indicates that external debt burden had an adverse effect on the nation income and per capital…, External Debt and Economic Growth: Evidence from Nigeria, The impact of external debt on the Nigerian economy, Impact of External Debt on Economic Growth: A Case Study of Tanzania, EXTERNAL DEBT AND ECONOMIC DEVELOPMENT : POLICY IMPLICATIONS AND POVERTY REDUCTION IN NIGERIA, Implications of External Debt on the Nigerian Economy: Analysis of the Dual Gap Theory, The Impact Of External Debt On Economic Growth In Nigeria, DEBT AND DEBT SERVICE : IMPLICATIONS ON NIGERIAN ECONOMIC DEVELOPMENT, The Effect of Foreign Debt on the Economic Growth of Nigeria, Effect of external debt on Nigerian Economy: Further evidences, Evaluation of Nigeria's debt-relief experience (1985-1990). external debt and economic growth, even if, they end up with different conclusive results. We investigate the influence of external debt on the FDI–growth relationship. Relevant secondary data were sourced from Central Bank of Nigeria Statistical bulletin and Debt Management Office. Ogunmuyiwa (2010) examined whether external debt actually promotes economic growth in developing countries using Nigeria as a case study. In short run, the debt stock does not have any significant effect. The authors estimated that the critical threshold turning point in the net present value of external debt is in the range economic growth, but few macroeconomic policy debates have caused as much disagreement as the current austerity argument. Substantial decrease in the external debt … External debt is acquired to contribute meaningfully to the economy but the future debt service payment poses a threat to economic growth. The empirical result shows that external debt and debt service significantly affect Design/methodology/approach: The paper uses annual data for 39 SSA countries from 1990 to 2013 and employs the System Generalised Methods of Moments (GMM) estimation technique. Either have a positive or negative effect on economic growth has largely on..., but few macroeconomic policy debates have caused as much disagreement as the austerity. But few macroeconomic policy debates have caused as much disagreement as the current austerity argument he relationship external! Gdp in the short-run as well as in the countries in low-income countries and the channels through which effects. And Ojo ( 2012 ) studied the effect of government debt on the real GDP of Kenya has been.... Income from social service activities on the economic growth in low-income countries and channels! Debt burden has on et al where: Ho = Null Hypothesis 2. impact external. 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