External Debt and Growth
IMF Working Papers, April 1, 2002
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Bibliographic details
- Authors: Hélène Poirson, Luca A Ricci, Catherine A Pattillo
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849073.001
Summary and research question
- Assesses the non linear impact of external debt on growth using a large panel data set of 93 developing countries over 1969–98.
- Results are described as generally robust across different econometric methodologies, regression specifications, and different debt indicators.
Key quantitative findings
- For a country with average indebtedness, doubling the debt ratio would reduce annual per capita growth by between half and a full percentage point.
- The differential in per capita growth between countries with external indebtedness (in net present value) below 100 percent of exports and above 300 percent of exports seems to be in excess of 2 percent per annum.
- For countries that are to benefit from debt reduction under the current HIPC initiative, per capita growth might increase by 1 percentage point, unless constrained by other macroeconomic and structural economic distortions.
- The average impact of debt becomes negative at about 160–170 percent of exports or 35–40 percent of GDP.
- The marginal impact of debt starts being negative at about half of these values.
- High debt appears to reduce growth mainly by lowering the efficiency of investment rather than its volume.
Methodology and robustness
- Analysis uses a large panel data set of 93 developing countries over 1969–98.
- Results reported as robust across different econometric methodologies, regression specifications, and different debt indicators.
Policy implications and scenarios
- Debt reduction under the HIPC initiative could increase per capita growth by 1 percentage point for beneficiary countries, contingent on the absence of other macroeconomic and structural distortions.
- Because high external debt primarily lowers investment efficiency, policy focus should include measures to improve investment efficiency alongside debt relief.
Classification and metadata (extracted from source)
- Authors: Hélène Poirson, Luca A Ricci, Catherine A Pattillo
- Date: April 1, 2002
- Series: Working Paper No. 2002/069
- Pages: 48
- DOI: https://doi.org/10.5089/9781451849073.001
- Subjects/Keywords: Debt burden, Debt service, Econometric analysis, Estimation techniques, Exports, External debt, Fiscal policy, Fiscal stance, International trade; Asia and Pacific; debt; Debt burden; debt dummy; debt indicator; debt relief; Debt service; debt stock; debt to export; debt variable; debt-growth relationship; Estimation techniques; Exports; external debt; Fiscal stance; GDP; Global; Growth; HIPC initiative; Laffer curve; Middle East; net present value; spline; Sub-Saharan Africa; WP
External Debt and Growth — Hélène Poirson, Luca A Ricci, Catherine A Pattillo, April 1, 2002.
Content in this bundle
- External Debt and Growth - WP/02/69