The debt-growth nexus in poor countries: a reassessment

Andrea Presbitero

No 2007-17, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper investigates the relationship between external indebtedness and economic growth, with a particular attention to LICs, for which the theoretical arguments of debt overhang and liquidity constraint have to be reconsidered. The estimation of a growth model, with a panel of 121 developing countries, supports a negative and linear relationship between past values of the NPV of external public debt and current economic growth. This could be due to the ?extended debt overhang?, according to which a large indebtedness leads to misallocation of capital and discourage long-term investment and structural reforms.

Keywords: External Debt; HIPC; Debt Relief; Economic Growth (search for similar items in EconPapers)
JEL-codes: C33 F34 H63 O11 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (7)

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https://www.econstor.eu/bitstream/10419/17940/1/dp2007-17.pdf (application/pdf)

Related works:
Working Paper: The debt-growth nexus in poor countries: a reassessment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:5531

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