The Impact of External Debt on Economic Growth:Empirical Evidence from Highly Indebted Poor Countries

Abu Siddique, E A Selvanathan and Saroja Selvanathan
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Abu Siddique: Business School, University of Western Australia
E A Selvanathan: Griffith Business School, Griffith University
Authors registered in the RePEc Author Service: Eliyathamby Antony Selvanathan

No 15-10, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: During the 1970s and 1980s, the external debt levels of poor countries rose to a level constituting a ‘debt crisis.’ The main source of the supply of external debt was the surplus revenue generated by the OPEC through significant increases in the price of oil during the 1970s. Unfortunately, many of the countries failed to use the external debt wisely and prudently. When the revenue from oil sales started to decline due to low oil prices during the 1980s, heavily indebted countries experienced difficulty servicing the debt. This paper analyses the extent to which the external debt burden impacts on a country’s gross domestic product (GDP) using data from HIPC over the period 1970-2007. The findings of empirical analysis suggest that, in the short-run as well as in the long-run, a reduction in debt stock would have significantly increased the growth performance of the indebted nations.

Pages: 33 pages
Date: 2015
New Economics Papers: this item is included in nep-ene and nep-his
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:15-10

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