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Title:External debt and growth in developing countries: A sensitivity and causal analysis PDF Logo
Authors:Chowdhury, Abdur R.
Issue Date:2001
Series/Report no.:WIDER Discussion Papers, World Institute for Development Economics (UNU-WIDER) 2001/95
Abstract:The paper aims to enhance the existing literature on the debt-growth nexus by analysing the relationship in two separate country groups using the extreme bounds analysis for sensitivity tests and the mixed, fixed, and random coefficient approach that allows for heterogeneity in the causal relationship between debt and growth. Irrespective of the debt measure used, the results are robust across the two country groups—HIPC and non-HIPC—as well as two different testing procedures. The extreme bounds analysis shows that the relationship between a debt measure and economic growth is robust to changes in the conditioning set of information included in the regression equations. The mixed, fixed, and random coefficient approach, on the other hand, show a statistically significant negative causal impact running from each of the four debt measures to economic growth in both country groups. The results have important policy implications.
Subjects:external debt
growth
sensitivity analysis
causality
JEL:F34
F35
O11
ISBN:9291900117
Document Type:Working Paper
Appears in Collections:WIDER Discussion Papers, United Nations University (UNU)

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