External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries

Abdelaziz Hakimi, Boussaada Rim () and Karmani Majdi ()
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Boussaada Rim: University of Jendouba, Université de Tunis, GEF-2A lab, Tunisia, Postal: Assistant Professor in Finance at the FSJEGJ University of Jendouba, Tunisia. Postal address:FSJEG-Jendouba, Campus, Universitaire de Jendouba, Avenue de l’UMA, 8189, Jendouba, Tunisia. Tel: 00 216 98 628 084
Karmani Majdi: CERIIM, La Rochelle, France, Postal: Associate Professor La Rochelle Business School - Excelia Group, CERIIM, La Rochelle, France. Postal address: 102, Rue de Coureilles, 17000, La Rochelle, France. Tel: 0033658147740

Journal of Economic Integration, 2019, vol. 34, issue 4, 725-745

Abstract: This study analyzes whether external debt is a driving factor for investment and economic growth in low-income countries. Using data over the period 2000~2017, we performed an analysis using the 23 countries in the sample and a split-sample analysis wherein we separated less indebted countries (12) from more indebted countries (11). Empirical results of the seemingly unrelated regressions model indicate that external debt significantly decreases investment and economic growth for both the total sample and the sub-samples. In addition, we found that trade openness is positively and significantly related to the level of growth per capita. This positive association is confirmed for both the total sample and the split sample. Findings also indicate that the level of growth exerts a positive and significant effect on investment for the total sample and for less indebted countries.

Keywords: External debt; Investment; Economic growth; Low-income countries; SUR Model (search for similar items in EconPapers)
JEL-codes: F34 O40 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0786

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