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What is the role of the quality of economic institutions in the relationship between external debt and growth? Evidence from the African franc zone

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  • Yann Nounamo

    (University of Douala)

Abstract

The objective of this paper is to analyze the role of economic institutions in the relationship between external debt and economic growth in the African Franc Zone. The methodology focuses on Blundell and Blond's (1998) Generalized Moment Method (GMM). The sample includes 12 countries over the period 1985-2015. We adopted the classification of economic institutions proposed by Rodrik (2005) for the empirical analysis. We conclude from this that Economic institutions are a constraint on the economic performance of these countries: (i) The quality of market creation institutions has a negative impact on the link between debt and growth in the region. Similarly, market regulation institutions have a negative impact. ii) Market stabilization institutions have positive effects on the link between debt growth and growth. This means that to stimulate economic growth through debt, better institutions are needed to make external debt profitable for the growth for the African Franc Zone. (iii) For the whole area, we obtain an optimal debt threshold of 50.56% of GDP for the sample considered.

Suggested Citation

  • Yann Nounamo, 2019. "What is the role of the quality of economic institutions in the relationship between external debt and growth? Evidence from the African franc zone," Economics Bulletin, AccessEcon, vol. 39(1), pages 467-479.
    • Handle: RePEc:ebl:ecbull:eb-18-01044
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    Cited by:

    1. Samir Abdelhafidh, 2020. "Does the external debt composition matter for economic growth in Tunisia?," Economics Bulletin, AccessEcon, vol. 40(4), pages 2802-2818.

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    More about this item

    Keywords

    External debt; economic institutions; growth; African franc zone;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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