Threshold Effect in the Relationship Between External Debt and Economic Growth: A Dynamic Panel Threshold Specification

Zaghdoudi, Taha

doi:10.1007/s40953-019-00182-y

Cited by 31 publications

(28 citation statements)

References 23 publications

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“…This figure also illustrates that, first, the debt curve for this bivariate quadratic function (i.e., equation 4) is strictly concave or inverted U-shape curve which shows an inverse relationship of growth with debt and, second, that the resulted value (i.e., 48.42 percent of GDP) is an optimum value of debtthreshold beyond which a slight increase in debt acquisition will disrupt the whole growth process and will lead to foster adverse effects on the economy. Further, these estimates are similar to the conclusion made by Nguyen et al(2003), Mupunga and Roux (2015), Baharumshah et al (2016), Tran (2018, Khanfir (2019), Zaghdoudi (2019), and Bhatta and Mishra (2020). These results also highlight the need of special policy intervention from the central government for keeping the magnitude of debt below the debt threshold.…”

Section: Analysis Of the Relative Maxima And Minimasupporting

confidence: 88%

“…It is that rank of government debt where the marginal effect of such debts turns negative (Minhaj-ud-Din, Azam & Tariq, 2021). Researchers have shown a soft corner for the acquisition of foreign debt as far as the acquired fund is, first, below the debt-threshold and, second, utilized in productive channels (Nguyen et al, 2003;Cordella et al, 20010;Greenidge et al, 2012;Van, 2018;Zaghdoudi, 2019;Lio & Lyu, 2021;Minhajud-Din, Azam & Tariq, 2021). They also suggest that, at need time, the gap between debt and GDP (i.e.…”

Section: Theoretical Literaturementioning

confidence: 99%

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The Analysis of Debt-Threshold: Empirical Evidence from Pakistan

Minhajuddin

Gul

Khan

2021

GSSR

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This paper intends to analyze the debt threshold for Pakistan over a period of 1976-2020 within the framework of the ARDL bounds testing approach. ADF and PP tests of stationarity confirmed that the extracted data set was stationarity either at level or at first difference. The F-bound test validated the presence of long-run co integration. This paper finds that the curve for the bi variate quadratic function is strictly concave and that the debt in flexion point is 48.42 percent of the gross domestic product. It implies that the marginal effect of debt turns negative beyond this level of debt. Findings suggest that government should ensure to acquire external debt up to the debt-in flexion point that would enhance the economic growth. Government should also work on fiscal consolidation and substituting the required burden of debt with alternate sources of revenue like FDI, grants, and international trade.

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Section: Analysis Of the Relative Maxima And Minimasupporting

confidence: 88%

Section: Theoretical Literaturementioning

confidence: 99%

The Analysis of Debt-Threshold: Empirical Evidence from Pakistan

Minhajuddin

Gul

Khan

2021

GSSR

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“…[ 37 ] used the ARDL model, and indicated that there is an inverse linkages among debt and real income in Malaysia over the period from 1991 to 2009. [ 16 ] found that there is a negative impact of external debt on the economic growth in the middle-income countries over the tested period from 2002 to 2016. [ 35 ] tested the association between the debt and real in income in Turkey.…”

Section: Review Of Literaturementioning

confidence: 99%

“…Theoretically, the debt overhang theory demonstrated that there is a negative linkage among debt and real income. The theory explained that the local and foreign investments will be decreased when the total debt exceeds the repayment ability of the country, which will subsequently cause the level of productivity and income to decrease [ 16 ]. However, the external debt affects negatively the financial strength of investment, which in turn will affect negatively the level of energy consumption.…”

Section: Introductionmentioning

confidence: 99%

Financial sector development, external debt, and Turkey’s renewable energy consumption

2022

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The primary aim of this paper is to provide fresh evidence by testing the linkage between renewable energy consumption, financial development, and external debts in Turkey, using the Bootstrap ARDL test (McNown et al. 2018). The Bootstrap ARDL test is desired over traditional co-integration tests due to its ability to predict when resolving power and size limitation issues, and its corresponding features, which have not been addressed by traditional co-integration tests. The ARDL testing model is employed to investigate the coefficients amongst the selected variables. The findings from the ARDL test illustrate that there is a positive linkage between renewable consumption and Turkey’s financial development. Furthermore, the outcomes illustrate that the coefficient of external debt is negative and significant. The results indicate that policymakers in Turkey must use the growth of the financial sector to minimize environmental degradation by promoting investment in energy and production through renewable energy sources. Furthermore, the research suggested that Turkey’s policy-makers should reformulate the external debt policy to reduce the negative influence of external debt on sustainable energy development. This could potentially be achieved by removing any restrictions on international capital flow or barriers on foreign capital and foreign investment. Hence, the findings of this paper provide valuable conclusions and recommendations for Turkey heading to sustainable and green financial sector.

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“…al. (2016), Tran (2018), Khanfir (2019), Zaghdoudi (2019), and Bhatta and Mishra (2020) who found that debt accumulation should be made at moderate level of GDP. However, our findings are different from that of Chudik et.…”

Section: Estimation Of Debt-thresholdmentioning

confidence: 99%

Estimating the Optimum Level of Debt-Threshold: Empirical Evidence from Pakistan

din¹

2021

PSSR

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This study aims to determine the debt threshold of foreign debt and investigate the effectiveness of debt overhang effect beyond this threshold. ARDL model is framed within the structure of Solow growth model for estimating the coefficients of this model. Quadratic bivariate model is applied to determine the optimum level of debt-threshold. Different sort of diagnostic tests are also conducted in this study. Sample period is ranging from 1976-2020. This study finds that debt overhang is effective above the optimal level of foreign debt which is 26.4% of gross domestic product. Findings also depict that Pakistan is experiencing the debt-overhang effect since 1976 as the ratio of external debt-to-GDP has remained over and above the optimal level of debt across the sample. Since no government can avoid external borrowing completely, therefore this study recommends that government borrowing should be restricted to the optimum level of foreign debt. Similarly, efforts should also be made for downsizing the debt burden by utilizing the nondebt sources of finances like grants and revenues and that effective debt-management policies should be formulated for enhancing the economic productivity.

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Threshold Effect in the Relationship Between External Debt and Economic Growth: A Dynamic Panel Threshold Specification

Cited by 31 publications

References 23 publications

The Analysis of Debt-Threshold: Empirical Evidence from Pakistan

The Analysis of Debt-Threshold: Empirical Evidence from Pakistan

Financial sector development, external debt, and Turkey’s renewable energy consumption

Estimating the Optimum Level of Debt-Threshold: Empirical Evidence from Pakistan

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