Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19848
Authors: 
Presbitero, Andrea F.
Year of Publication: 
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

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