Threshold Effects of External Debt on Economic Growth of Iran: Smooth Transition Regression (STR) Model

Mohammad Alizadeh (), Abolghasem Golkhandan () and Sahebeh Mohamadian Mansoor ()
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Mohammad Alizadeh: Assistant Professor of Economics, Lorestan University
Abolghasem Golkhandan: Ph.D. Student in Economics, Lorestan University
Sahebeh Mohamadian Mansoor: Lecturer, University of Payam-Noor

Quarterly Journal of Applied Theories of Economics, 2015, vol. 2, issue 2, 1-24

Abstract: Previous studies show conflicting results about the effects of external debt on economic growth in different countries; this inconsistency in results could be due to nonlinear effects of external debt on economic growth. The identification of this nonlinear relationship can be widely used in government policies toward external debt. This paper investigates the impact of external debt on economic growth in Iran during the period 1970-2014. For this purpose, is used the smooth transition regression (STR) model. Results of the estimated Smooth Transition Regression (STR) model, approved the nonlinear effects of external debt on economic growth, also external debt had a negative effect on economic growth in the form of a two regime structures with a threshold level of about 18770 million dollars. So that increases the intensity of this negative impact with crossing of threshold level and entering the second regime.

Keywords: External Debt; Economic Growth; Iran; Smooth Transition Regression (STR) Model. (search for similar items in EconPapers)
JEL-codes: C32 F33 F34 (search for similar items in EconPapers)
Date: 2015
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