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IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH: AN EMPIRICAL INVESTIGATION FROM SOUTH ASIAN COUNTRIES
Corresponding Author(s) : Muhammad Reehan Hameed
Humanities & Social Sciences Reviews,
Vol. 9 No. 2 (2021): March
Abstract
Purpose of the study: This study aims to analyze the short-run and as well as long-run effects of public debt on the economy of South Asian countries. And to resolve problems in managing and servicing their massive public debt obligations.
Methodology: For econometrically investigation, panel data has been used for the era of 1990-2019. For obtaining econometric outcomes, we applied the Fixed Effect Model and PMG/ Panel ARDL.
Main Findings: The results revealed that public debt negatively affected the economic performance of these countries. This effect is adverse both in short as well as in long period.
Applications of this study: The study can be effective for simultaneous achievement of the desirable level of economic growth and public debt stock seems to be difficult and could remain elusive if some serious measures have not been taken.
Novelty/Originality of this study: The study recommends the efficient and productive utilization of borrowed funds to avoid their negative repercussions.
Keywords
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Agenor, P. R. & Montiel, P. (1996). Development macroeconomics. Princeton. New Jersey: Princeton University Press.
Ajayi, L. B., & Oke, M. O. (2012). Effect of External Debt on Economic Growth and Development of Nigeria. International Journal of Business and Social Science, 3(12), 297-304.
Amassoma, D. (2011). External Debt, Internal Debt and Economic Growth Bound in Nigeria Using A Causality Approach. Current Research Journal of Social Sciences, 3(4), 320-325
Anwar, Sabahat (1995) Foreign Debt of South Asia and Its Economic Implications. M. Phil, Thesis. Department of Economic, Quaid-i-Azam University, Islamabad.
Ayadi, F. S., & Ayadi, F. O. (2008). The Impact of External Debt on Economic Growth: A Comparative Study of Nigeria and South Africa. Journal of Sustainable Development in Africa, 10(3), 234-264.
Azman-Saini, W. N. W., Law, S. H., & Ahmad, A. H. (2010). FDI and Economic Growth: New Evidence on the Role of Financial Markets. Economics Letters, 107(2), 211-213. https://doi.org/10.1016/j.econlet.201 0.01.027 DOI: https://doi.org/10.1016/j.econlet.2010.01.027
Bakar, A., & Hassan, S. (2008). Empirical Evaluation on External Debt of Malaysia. International Business & Economics Research Journal, 7(2), 95-108. https://doi.org/10.19030/iber.v7i2.3226 DOI: https://doi.org/10.19030/iber.v7i2.3226
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Barro, R. J., & Lee, J. W. (1994). Sources of Economic growth. In Carnegie-Rochester Conference Series on Public Policy, 40(1), 1-46. https://doi.org/10.1016/0167-2231(94)90002-7 DOI: https://doi.org/10.1016/0167-2231(94)90002-7
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Berben, R. P., & Brosens, T. (2007). The Impact of Government Debt on Private Consumption in OECD Countries. Economics Letters, 94(2), 220-225. https://doi.org/10.1016/j.econlet.2006.06.033 DOI: https://doi.org/10.1016/j.econlet.2006.06.033
Butts, H. C. (2009). Short Term External Debt and Economic Growth Granger Causality: Evidence from Latin America and the Caribbean. The Review of Black political economy, 36(2), 93-111. https://doi.org/10.1007/s12114-009-9041-7 DOI: https://doi.org/10.1007/s12114-009-9041-7
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Elmendorf, D. W., & Mankiw, N. G. (1999). Government Debt. Handbook of macroeconomics, 1, 1615-1669. https://doi.org/10.1016/S1574-0048(99)10038-7 DOI: https://doi.org/10.1016/S1574-0048(99)10038-7
Fincke, B., & Greiner, A. (2015). Public Debt and Economic Growth in Emerging Market Economies. South African Journal of Economics, 83(3), 357-370. https://doi.org/10.1111/saje.12079 DOI: https://doi.org/10.1111/saje.12079
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