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Title:The debt-growth nexus in poor countries: a reassessment PDF Logo
Authors:Presbitero, Andrea F.
Issue Date:2006
Series/Report no.:Proceedings of the German Development Economics Conference, Berlin 2006 / Verein für Socialpolitik, Research Committee Development Economics 22
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 is 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. This work underlines the critical role of economic policies and institutions, the necessity of focusing on LICs and fostering macroeconomic stability.
Subjects:External Debt
HIPC
Debt Relief
Economic Growth
JEL:O11
C33
F34
H63
Document Type:Conference Paper
Appears in Collections:Proceedings of the German Development Economics Conference, 2006 (Berlin)

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