As a result, this study seeks to assess the effect of external debt on economic growth in Nigeria as well as provide further evidences on the impact of debt on the process of growth in Nigeria. Servicing external debt (paying debt interest payments) ceteris paribus, reduces GDP because the monetary payments flow out of the country. This study investigates the effect of the external debt burden on economic growth and development of Nigeria .It adopted regression analysis of OLS on secondary data sourced from CBN, Economical and Financial review, Business times, Financial Standard and relevant publication from Nigeria on variable like National Income, Debt Service Payment, External Reserves, Interest rate among … The simultaneous attainment of sustainable levels of economic growth and external debt appear difficult at the moment and could remain elusive if aggressive measures are not undertaken. These included Kenya, Tanzania, Uganda, and Rwanda. The study used panel data for the period 1981 to 2014. ?����� �(���h)e�a�%�?k��Cȸ*,��2�Ƕݿz�������k��k�q��E���^��uJ�w�����=�yV���u:‹�� �6�݂:1Z_w=}96�ˆiJ?7]=i�3�d.~�q�b�&yw�1㡴�f*�\�}]�&��u-o�Ӥ�6�͘v�4We�4��1E�/*��* Od�,�fEW.�(���l���-46բ�poMمMr?���\^��^ɛ6�a>JF�. Debt servicing does not appear to affect growth adversely but has some crowding-out effects on private investment. performance of EA member states, whilst its short-run effect may be positive depending on the country. The effect of external debt on domestic investment and economic growth of a country has remained questionable for theoretical thinkers, stakeholders and academics alike. Where: H o = Null Hypothesis 2. The study used time series data from 1980 to 2013. His study was based on a sample of 114 developing countries over the period 1980~2004. There are a lot of empirical studies which focus on developing countries and look at the relationship between external debt and economic growth. 2. The data was analyzed This paper estimates empirically the impact of external debt on economic growth in Ghana to determine the existence of a ‘debt overhang' and/or 'crowding out' effects for the period 1970 to 1999. effect of external debt is stronger on the economic growth in comparison to domestic debt. economic growth (debt overhang). (2003) find support for a non-linear relationship between external debt and economic growth using a panel dataset of 55 low-income countries over the time period 1970–1999. The rest of the paper is organized as follows. 1 (March 2018), pp. 4 0 obj <>stream Impact of the Public Debt Level on Economic Growth and Infl ation The authors Reinhart, Rogoff (2010a), in their studies on the basis of long-term historical data, analyze the correlation between the economic growth, infl ation and levels of government and the external debt. External Debt and Economic Growth: The Case of Emerging Economy Author(s): Sami Al Kharusi and Mbah Stella Ada Source: Journal of Economic Integration, Vol. This study is therefore an effort to determine the effect of Public Debt on Economic Growth in Kenya. (2011) estimate much lower threshold for the panel of 93 developing countries. The empirical result shows that external debt and debt service significantly affect (2012) found bidirectional causality between economic growth and external debt … In an IMF Working Paper, Pattillo . You are currently offline. Several policy implications emerge from the study. the stock of external debt and growth. The authors estimated that the critical threshold turning point in the net present value of external debt is in the range They conducted the analysis on a sample of 44 countries. As indicated by Cohen (1993), the relati. This empirical analysis confirms the lack of consensus on the external debt-growth relationship In general, external debt may affect economic growth in two ways:- a. The study uses a linear regression model to analyse Kenyan data %PDF-1.4 Times series regression model has been used to determine the effect of public debt on economic growth in Kenya and data was analyzed using E-views 8. Specifically, the study tries to answer the question whether external debt and debt servicing have any significant effect on Economic Growth. These included Kenya, Tanzania, Uganda, and Rwanda. The negative effect of public debt on the growth of economy was confirmed in the empirical results of Schclarek (2004), Balassone et al. While high levels of public debt are likely to be deleterious for growth, this negative effect is non-linear and is observed only above a certain level of debt. Debt seems to be a problem if it passes a certain threshold. THE EFFECT OF EXTERNAL DEVT ON THE NIGERIA ECONOMIC GROWTH (1989-2010) CHAPTER ONE INTODUCTION 1.1 BACKGROUND OF THE STUDY The accumulation of external debt is a common phenomenon of the third World countries at the stage of economic growth and development where the supply of domestic savings is low, current account payment deficit is high and import of capital is … The simultaneous attainment of sustainable levels of economic growth and external debt appear difficult at the moment and could remain elusive if aggressive measures are not undertaken. 2 Abstract: This paper examines the determinants of economic growth for Pakistan, the impact of domestic debt and external debt on the economic growth of Pakistan separately over period of 1980 to 2010, using Ordinary Least Square (OLS) approach to Cointegration, Unit Root Testing, Serial Correlation Testing, test for checking Heteroskedasticity and CUSUM test of stability. correlations between debt and growth, and does not take into account other determinants of growth as well as issues such as reverse causality (i.e., low growth can lead to large public debt). This paper assesses the impact of external debt on growth in low-income countries and the channels through which these effects are realized. Ogunmuyiwa (2010) examined whether external debt actually promotes economic growth in developing countries using Nigeria as a case study. Specifically, the study tries to answer the question whether external debt and debt servicing have any significant effect on Economic Growth. This implies that public debt can either have a positive or negative effect on economic growth (Mencinger et al. The data was analyzed By fitting a production function model to annual data for the period 1980-2011, the study examines the dynamic effect of debt service, capital stock and labour force on the economic growth of the country. Among recent studies, Clements et al. An average figure for External debt of 50% of the GDP is considered as the threshold level. Despite these efforts, private investments and economic growth have remained low. 33, No. 3. Purpose: This paper examines the effect of external debt on economic growth in Sub-Saharan Africa (SSA) in view of an upsurge in the level of external debt in many countries on the continent. Servicing a debt by export earnings may affect economic growth by depleting available income from social service activities. Some of these works are: Jonse (2002), Befekadu (1992) and Hailemariam (2011). Relevant secondary data were sourced from Central Bank of Nigeria Statistical bulletin and Debt Management Office. Borrowing, Domestic debt, Economic growth, Foreign debt, Public debt Abstract The study investigated the effect of public debts on economic growth of Nigeria for the period of thirty-eight (38) years, 1981 to 2018. External debt is a vital source of public financing in developing countries and carries the potential to play a key role in promoting economic growth. economic growth, but few macroeconomic policy debates have caused as much disagreement as the current austerity argument. external debt and domestic debt) and economic growth in Swaziland. Some features of the site may not work correctly. This paper aims to examine the threshold effect of Government’s external debt on economic growth in a group of 10 emerging countries. external debt on GDP in the short-run as well as in the long-run. Among recent studies, Clements et al. From the literature on debt overhang and its effects on growth it is evident that debt relief might have a stimulating effect on investment and economic growth. This study models external debt and economic growth nexus for policy analysis on public finance and public debt management. In presence of high debt there is inefficient use of resources which was found to be the main reason for negative effect on growth. Threshold estimation is conducted on data for 39 developing countries over 1984–2010. Impact of External Debt on Economic Growth: A Case Study of Tanzania Faraji Kasidi1 and A. Makame Said2 Abstract This study investigated the impact of external debt on economic growth of Tanzania for the period of 1990-2010. These debt payments reduce the amount available to invest in improving public services, which can help economic development. We investigate the influence of external debt on the FDI–growth relationship. Results show that FDI‐induced growth is dependent on an external debt threshold. For Their findings contrast the finding of Checherita and Rother (2010) . External debt is acquired to contribute meaningfully to the economy but the future debt service payment poses a threat to economic growth. Since debt overhang exist when a country exceeds its repayment ability, it can be suggested that, expected debt service is an increasing function of country’s output level (Krugmanv1988; Sachs 1989). External debt may be used to stimulate the = External debt has no significant effect on Nigeria economic growth and development H o = Debt Service Payment, External reserve resource and interest rate has no significant effect on Nigeria economic growth and development The rejection of the null hypothesis means the acceptance of the alternative hypothesis. The research said that high levels of debt slowed down the economic growth. Our data allow us to look at the impact of household, non-financial corporate and government debt separately.1 Using variation across countries and over time, we examine the impact of the movement in debt on growth.2 Our results support the view that, beyond a certain level, debt is bad for growth. PDF | The study examines the effect of external debt on the economic growth of Nigeria. As discussed in Section 1, the results are inconclusive. A number of other studies have looked at the impact of external debt on economic growth in developing economies. This study is therefore an effort to determine the effect of Public Debt on Economic Growth in Kenya. impact of debt on economic growth. Threshold estimation is conducted on data for 39 developing countries over 1984–2010. The aim of the study was to investigate the impact of external debt on economic growth. (2003) find support for a non-linear relationship between external debt and economic growth using a panel dataset of 55 low-income countries over the time period 1970–1999. A number of researchers have examined the effect of external debt on economic growth since the beginning of the new millennium. The results of these studies, however, are somewhat ambiguous with regard to the effect of external debt on economic growth. found that public debt has a negative impact on economic growth when the debt is more than 90% of the GDP. Semantic Scholar is a free, AI-powered research tool for scientific literature, based at the Allen Institute for AI. Despite its common use, the debt overhang hypothesis was not originally developed to analyse the effects of external debt on economic growth. Impact of External Debt on Economic Growth: A Case Study of Tanzania Faraji Kasidi1 and A. Makame Said2 Abstract This study investigated the impact of external debt on economic growth of Tanzania for the period of 1990-2010. I. I. ntroduction he relationship between external public debt and economic growth continues attracting the interest of policy makers and academicians. real exchange rate, real interest rate and inflation. This study aimed at finding out the effect public debt on the level of private investment and economic growth in Kenya. This study examines the effect of both public external and domestic debt on economic growth in Swaziland including variables such as; inflation and government expenditure to the model to avoid spuriousness of the results. Based on several Overall, the theoretical literature favours the study of the effects of very high debt on the capital stock, growth, and risk, since it tends to point to a negative link between the public This article seeks to determine the effect of the amount of public debt on the long-run economic growth of the Israeli economy, using data from the years 1983–2013. The debt overhang and the disincentive to invest, The Federal Government Debts Impact on Economic Growth, Conceptual Issue in Monetary and Fiscal Policies Vol 1 Pg 96104 Adeyemo Public House , Akure, Economic Growth and Foreign Debt: A Case Study of Nigeria, Striking Diversily of Experience with Growth Episode and Poverty Changes, Unidirectional and Positive Causal Relationship between Foreign Debt service and GDP Growth, View 6 excerpts, cites background and results, View 3 excerpts, cites results and background, View 5 excerpts, cites background and methods, View 7 excerpts, cites methods and background, Umar Yar ’ adua ( Nov 26 , 2007 ) : Financial Standard Africa ’ s Re - Development Needs : A Nigeria Perspective, Central Bank of Nigeria, Economic and Financial Review Vol, By clicking accept or continuing to use the site, you agree to the terms outlined in our. The research is based on data obtained from 1980 to 2007 on external debt, private investment, foreign direct investment (FDI), gross domestic product (GDP) and Another contribution of this paper is in estimating the long-run effects of public debt build-up on economic growth, regardless of whether there exists a threshold effect from debt-to-GDP ratio on output growth. external debt and economic growth, even if, they end up with different conclusive results. Chart 11: Government debt-to-GDP growth in OECD countries, 1970 – 2011 28 Chart 12: Government debt-to-GDP ratios of selected countries, 1970 – 2014 29 Chart 13: Projections of Germany’s government debt-to-GDP ratio based on the Domar model 37 Chart 14: Government debt and economic growth, 1880 – … JEL classification: C22, F33, H63, O40, O52 Keywords: Public debt, economic growth, bounds testing, euro area, peripheral euro area countries, central euro area countries. This paper reviewed the roles of debt management practices on sustainable economic growth and development with particular emphasis on Nigeria. The study used panel data for the period 1981 to 2014. 2014). 1141-1157 Published by: Center for Economic Integration, Sejong University Stable URL: REFERENCES Linked references are available on JSTOR for this article:-reference#references_tab_contents You may need … Investment Slowdown in Developing Countries During the 1980s: Debt Overhang or Foreign Capital Inflows? This has allowed boosting the debate on the impact of external debt on growth. The effects of external debt growth variables on the growth rates of the real GDP shares of agriculture, industry, and services are also analysed. (2002) analyse the effect debt burden has on et al developing economies. Information was generated extensively from literature, the Nigeria Central Bank and National Bureau of Statistic reports. The finding indicates that external debt burden had an adverse effect on the nation income and per capital…, External Debt and Economic Growth: Evidence from Nigeria, The impact of external debt on the Nigerian economy, Impact of External Debt on Economic Growth: A Case Study of Tanzania, EXTERNAL DEBT AND ECONOMIC DEVELOPMENT : POLICY IMPLICATIONS AND POVERTY REDUCTION IN NIGERIA, Implications of External Debt on the Nigerian Economy: Analysis of the Dual Gap Theory, The Impact Of External Debt On Economic Growth In Nigeria, DEBT AND DEBT SERVICE : IMPLICATIONS ON NIGERIAN ECONOMIC DEVELOPMENT, The Effect of Foreign Debt on the Economic Growth of Nigeria, Effect of external debt on Nigerian Economy: Further evidences, Evaluation of Nigeria's debt-relief experience (1985-1990). The study used time series data on external debt and economic performance. A theoretical model is developed to account for the influence of debt on the FDI–growth nexus. According to Ajayi (1991), the debt management systems also have a direct macro economic impact on the borrowing countries. Design/methodology/approach: The paper uses annual data for 39 SSA countries from 1990 to 2013 and employs the System Generalised Methods of Moments (GMM) estimation technique. This paper examines the effect of government debt on economic growth in Nigeria between 1986 and 2013 – using the ordinary least square method. Taner Turan, Halit Yanıkkaya, External debt, growth and investment for developing countries: some evidence for the debt overhang hypothesis, Portuguese Economic Journal, 10.1007/s10258-020 … the effect of external debt on economic growth in ghana: an ardl approach by angela ackon (10701538) this long essay is submitted to the university of ghana, legon in partial fulfilment of the requirement for the award of master of science in development finance degree july, 2019 Over emphasis on negative impact of debt will cause morbid fear of debt, resulting in debt avoidance when it would have stimulated the economy by bringing in the much needed capital for … Ordinary least square multiple regression technique was used. Where: Ho = Null Hypothesis 2. The aim of this study was to estimate the effect of external public debt on economic growth in four East African countries. A priori expectation was that external debt would bring about economic growth. Long run significant positive effect of external public debt stock on GDP growth have been found from this investigation. It is shown that the estimates of long-run effects of debt accumulation on GDP growth are robust to feedbacks from growth to debt. In the debt model effect of domestic debt and external debt on the real GDP of Kenya has been captured. The aim of this study was to estimate the effect of external public debt on economic growth in four East African countries. the effect of public debt on economic growth in kenya submitted by: gladys musyoka d63/85656/2016 a research project submitted in partial fulfillment of the requirements for the award of the degree of masters in science (finance) to the school of business, university of nairobi november 2017 External debt has no significant effect on Nigeria economic growth and development Debt Service Payment, External reserve resource and interest rate has no significant effect on Nigeria economic growth and development The rejection of the null hypothesis means the acceptance of the alternative hypothesis. 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