IDEAS home Printed from https://ideas.repec.org/p/wam/wpaper/12.html
   My bibliography  Save this paper

The Relationship Between External Debt And Economic Growth In The West African Monetary Zone: A Panel Data Analysis

Author

Listed:
  • Ismaila Jarju
  • Edward Nyarko
  • Kormay Adams
  • Ozolina Haffner
  • Olukayode S. Odeniran

Abstract

This study analyzes trends and investigates the relationship between external debt and economic growth in the WAMZ using descriptive trend analysis and panel data analysis. The trend and descriptive analysis assessed the behavior of external debt and economic growth while the empirical analyses employed panel data regression in which a fixed effect model was estimated after the implementation of the Hausman test to verify its appropriateness over the random effect model. The fixed effect model and the dynamic version show that the relationship between external debt and growth in the WAMZ is non-linear “Laffer curve” shaped, confirming the debt overhang theory that the accumulation of external debt beyond a certain threshold adversely affects economic growth. The results also confirm the crowding-out effect of rising external debt stock as the co-efficient of external debt service was negative and statistically significant, indicating that rising debt service associated with high levels of external debt stock limits the use of limited resources (revenue) from being channeled to productive public investments that would accelerate economic growth.

Suggested Citation

  • Ismaila Jarju & Edward Nyarko & Kormay Adams & Ozolina Haffner & Olukayode S. Odeniran, 2016. "The Relationship Between External Debt And Economic Growth In The West African Monetary Zone: A Panel Data Analysis," Working Papers 12, West African Monetary Institute.
    • Handle: RePEc:wam:wpaper:12
    as

    Download full text from publisher

    File URL: http://wami-imao.org/sites/default/files/OccassionalPapers/External%20Debt%20and%20Economic%20Growth%20in%20the%20WAMZ_December%202016_English.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adekunle, Wasiu & Bekoe, William & Badmus, Sheriff & Anagun, Michael & Alimi, Wasiu, 2021. "Nexus Between Fiscal Discipline And The Budget Process In Africa: Evidence From Nigeria," MPRA Paper 110061, University Library of Munich, Germany.
    2. Adeniyi, Oluwatosin & Adekunle, Wasiu & Orekoya, Samuel, 2018. "Non-linear Relation between External Debt and Economic Growth in Nigeria: Does the Investment Channel Matter?," MPRA Paper 99975, University Library of Munich, Germany, revised 07 Apr 2019.

    More about this item

    Keywords

    External Debt; Economic Growth; Panel Data Analysis; WAMZ;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wam:wpaper:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MOHAMED FOFANA (email available below). General contact details of provider: https://edirc.repec.org/data/wamingh.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.