External Debt and Growth

Pattillo, Catherine; Poirson, Hélène; Ricci, Luca

doi:10.5202/rei.v2i3.45

Cited by 211 publications

(252 citation statements)

References 31 publications

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“…Kumar and Woo (2010), Reinhart and Rogoff (2010) and Baum et al (2013)). Examining the channels through which debt impacts growth, Pattillo et al (2011) find for a sample of 93 developing countries that the majority of the effect of public debt on output growth occurs via total factor productivity (TFP) rather than via capital accumulation. On the other hand, theoretical and quantitative studies on debt policy (see the literature surveyed below) traditionally focus on the effects of public debt on capital investment and interest rates, while treating the dynamics of TFP as an exogenous process.…”

Section: Introductionmentioning

confidence: 99%

Public debt and total factor productivity

Kaas

2015

Econ Theory

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Public Debt and Total Factor Productivity Abstract This paper explores the role of public debt and fiscal deficits on factor productivity in an economy with credit market frictions and heterogeneous firms. When credit market conditions are sufficiently weak, low interest rates permit the government to run Ponzi schemes so that permanent primary deficits can be sustained. For small enough deficit ratios, the model has two steady states of which one is an unstable bubble and the other one is stable. The stable equilibrium features higher levels of credit and capital, but also a lower interest rate, lower total factor productivity and output. The model is calibrated to the US economy to derive the maximum sustainable deficit ratio and to examine the dynamic responses to changes in debt policy. A reduction of the primary deficit triggers an expansion of credit and capital, but it also leads to a deterioration of total factor productivity since more low-productivity firms prefer to remain active at the lower equilibrium interest rate. Terms of use: Documents inJEL-Code: D920, E620, H620.

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Section: Introductionmentioning

confidence: 99%

Public debt and total factor productivity

Kaas

2015

Econ Theory

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“…Higher debt levels in emerging economies correlate with high inflation (Reinhart & Rogoff, 2010). The 'safe' debt-to-GDP thresholds depend on a country's default and inflation history, and can be as low as 15% (Patillo, Poirson, & Ricci, 2011). The resultant effect of high debt levels create high debt burden and makes debt servicing a threat to economic stability, particularly in developing countries (Suleiman & Azeez, 2012).…”

Section: Discussion Of the Resultsmentioning

confidence: 99%

The Effect of External Debt on Inflation Rate in Kenya, 1972-2012

Mweni¹,

Njuguna²,

Oketch³

2016

International Journal of Financial Research

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The purpose of the paper was to review existing studies on external debt and inflation and establish the effect of external debt on inflation in Kenya over the period of 1972-2012. The study used real annual time series data obtained from IMF International Financial Statistics database. The time series data was tested for stationarity using Augmented Dickey-Fuller (ADF), tests for heteroskedasticity, autoregressive conditional heteroskedasticity (ARCH), autocorrelation and normality were done to ensure the data does not violate the assumptions of classical linear regression model (CLRM). A macroeconomic debt growth model using ordinary least square regression was used to estimate the relationship between external debt and inflation. Descriptive statistics indicates that Kenya experienced high levels of inflation, with mild fluctuations. The highest levels of inflation were recorded in 1991 and 2008, due to the OPEC oil crisis and post-election violence, respectively. In terms of correlation, the study reveals that external debt and inflation showed that external debt and inflation are negatively correlated, with a Spearman's correlation coefficient of -0.1768 with a P value of 0.2687. Regression results showed that external debt has a positive and significant effect on inflation, with an F statistic of 7.14 with a P value of 0.011. The study concludes that there is a significant effect of external debt on inflation. The study recommends sustaining lower inflation rates through tight fiscal and monetary policies, financing of budget deficit from non-inflationary sources, implementation of price stabilization program by subsiding basic food items, and effectively managing external debt.

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“…Therefore, considering the overall normality test which is the use of Jarque Bera (JB) statistic shows evidence of nonnormality for all the variables as their JB-Statistics are greater than the critical value of 5.99 at 5% level of significance [23]. Therefore, the alternative inferential statistics that follow non-normal distributions are appropriate in this case.…”

Section: Percentage Change In External Debts Of Nigeria After Debts Cmentioning

confidence: 99%

External Debts and Economic Growth in Nigeria: An Empirical Study Using Autoregressive Distributed Lag Model

Os¹,

Ts²

2016

Bus Eco J

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This paper models some economic theories which explained the casual relationship between accumulated funds/ loans from external sources (external debts) and economic growth with a more focus on Nigerian economy, as it is a usually trend for debts of third world and developing countries debts profile to be high, and this case is also the same with Nigeria as the country debts profile is on the increase once more after the debt cancellation of 2005 by the Paris Club of creditors. Also in the innovation by this study is the used of the Autoregressive Distributed Lag (ADL) model to capture the effect of externals debts on viability and growth Nigerian economy from 1984-2012. The preliminary and normality tests shows that the variables are positively skewed but are not normally distributes, while the econometric tests of Stationarity (Unit Root Test) and Co-integration Tests conform that all the variables exhibit Stationarity at first differenced and the existence of long-run relationship between the variables was also confirmed by the Johansen Cointegration test carried out. The result from the ordinary least squares method used confirms the existence of a dual behaviour as the lag 1 of external debts has positive while external debts of present year posed a negative effect on the performance of the economy. The recommendations are Nigeria government should ensure that debts incurred are channel towards productive uses and debt management office of the government should strengthen its plans and foster appropriate use of loans in the critical area the need for is identified.

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External Debt and Growth

Cited by 211 publications

References 31 publications

Public debt and total factor productivity

Public debt and total factor productivity

The Effect of External Debt on Inflation Rate in Kenya, 1972-2012

External Debts and Economic Growth in Nigeria: An Empirical Study Using Autoregressive Distributed Lag Model

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