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External Debt and Economic Vulnerability: An International Evidence

Author

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  • Dau, Nam Huong

    (Ho Chi Minh National Academy of Politics, Hanoi, Vietnam)

  • Pham, Thanh

    (VNU University of Economics and Business, Vietnam National University, Hanoi, Vietnam)

  • Luu, Hiep Ngoc

    (VNU University of Economics and Business, Vietnam National University, Hanoi, Vietnam)

  • Nguyen, Dinh Trung

    (VNU University of Economics and Business, Vietnam National University, Hanoi, Vietnam)

Abstract

This paper examines the influence of external debt on economic vulnerability. Using an international sample of 96 countries over the period from 1990 to 2018, we find that external debts contribute to spurring economic vulnerability. In particular, we show that a higher level of external debt is associated with a greater economic vulnerability through accelerating the scale and the likelihood of external shocks in the economy. However, this finding is only hold for long-term external debt. Short-term external debt, on the other hand, can actually reduce economic vulnerability. We further examine the distribution of external debt and find that public external debt has a negative impact on economic stability, while private external debt appears to have no apparent impact. Overall, our results have important implications for authorities responsible for ensuring the resilience of the economy.

Suggested Citation

  • Dau, Nam Huong & Pham, Thanh & Luu, Hiep Ngoc & Nguyen, Dinh Trung, 2024. "External Debt and Economic Vulnerability: An International Evidence," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 39(4), pages 969-990.
    • Handle: RePEc:ris:integr:0930
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    Keywords

    External Debt; Economic Vulnerability;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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