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External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries

Author

Listed:
  • Abdelaziz, HAKIMI

    (University of Jendouba, Tunisia, V.P.N.C lab)

  • Rim, BOUSSAADA

    (University of Jendouba, Université de Tunis, GEF-2A lab, Tunisia)

  • Majdi, KARMANI

    (CERIIM, La Rochelle, France)

Abstract

This study analyzes whether external debt is a driving factor for investment and economic growth in low-income countries. Using data over the period 2000~2017, we performed an analysis using the 23 countries in the sample and a split-sample analysis wherein we separated less indebted countries (12) from more indebted countries (11). Empirical results of the seemingly unrelated regressions model indicate that external debt significantly decreases investment and economic growth for both the total sample and the sub-samples. In addition, we found that trade openness is positively and significantly related to the level of growth per capita. This positive association is confirmed for both the total sample and the split sample. Findings also indicate that the level of growth exerts a positive and significant effect on investment for the total sample and for less indebted countries.

Suggested Citation

  • Abdelaziz, HAKIMI & Rim, BOUSSAADA & Majdi, KARMANI, 2019. "External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 34(4), pages 725-745.
    • Handle: RePEc:ris:integr:0786
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    Citations

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    Cited by:

    1. Hichem Saidi & Abdelaziz Hakimi & Houssem Rachdi, 2024. "On the Technology-Growth Relationship: Does the Institutional Quality Matter? A Panel Simultaneous Equation Framework," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 3439-3465, March.
    2. Scott Regifère MOUANDAT, 2021. "dette optimale au Gabon," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 12(1), pages 132-149, June.
    3. Minhaj ud-Din & Muhammad Azam Khan & Muhammad Tariq, 2020. "External Debt - Blessing or Curse: Empirical Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 235-246.
    4. Arsène Aurelien Njamen Kengdo & Tii N. Nchofoung & Philemon Bonaventure Ntang, 2020. "Effect of external debt on the level of infrastructure in Africa," Economics Bulletin, AccessEcon, vol. 40(4), pages 3349-3366.
    5. Charles O Manasseh & Felicia C Abada & Ebelechukwu L Okiche & Ogochukwu Okanya & Ifeoma C Nwakoby & Peter Offu & Anuli R Ogbuagu & Chiedozie O Okafor & Paul C Obidike & Nnenna G Nwonye, 2022. "External debt and economic growth in Sub-Saharan Africa: Does governance matter?," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-28, March.
    6. Yusuf Dogan & Deniz Sukruoglu, 2022. "Analysis of External Debt-Based Growth Hypothesis with Markov Regime Switching Models for the Turkish Economy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-1), pages 329-360, June.
    7. Mosab I. Tabash & Umar Farooq & Samir K. Safi & Muhammad Nouman Shafiq & Krzysztof Drachal, 2022. "Nexus between Macroeconomic Factors and Economic Growth in Palestine: An Autoregressive Distributed Lag Approach," Economies, MDPI, vol. 10(6), pages 1-14, June.
    8. Nasiru Inuwa & Sagir Adamu & Mohammed Bello Sani & Abubakar Muhammad Saidu, 2022. "Resource Curse Hypothesis in GCC Member Countries: Evidence from Seemingly Unrelated Regression," Biophysical Economics and Resource Quality, Springer, vol. 7(4), pages 1-10, December.
    9. Scott Régifère Mouandat, 2021. "Optimal debt in Gabon: an analysis in term of foreign currency compositions [La dette optimale au Gabon: une analyse en termes de composition en devises]," Post-Print hal-03326826, HAL.

    More about this item

    Keywords

    External debt; Investment; Economic growth; Low-income countries; SUR Model;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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