FROM EXTERNAL DEBT TO ECONOMIC GROWTH … AND BACK
FROM EXTERNAL DEBT TO ECONOMIC GROWTH … AND BACK

Summary/Abstract: This paper is meant to trace the relationship existing between external debt and economic growth for 109 countries spread all over the world. We have resorted for this study to cross-sectional data, the economic modelling being simultaneously made for a three-year period. After having constructed four models and after having estimated them by econometric techniques, we have selected the most appropriate of them, which is in fact the version to be build upon within future personal studies. The results indicated as optimum the model including GDP in logarithm as endogenous variable and total external debt in logarithm and development level dummy as exogenous variables. The analysis revealed a positive relationship between external debt and economic growth, indicating that the threshold above which the indebting influence on the economic performance should become negative has not been reached yet. The coefficients obtained within the estimations performed, construed as elasticities, show that, while GDP is inelastic in relation with debt, the latter has a supra-unitary elasticity, therefore its modification being ampler than the GDP one.

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