External debt and growth: role of stable macroeconomic policies. Issue 50 (22nd July 2020)

• Record Type: Journal Article
• Authors: Dey, Sima Rani; Tareque, Mohammad
• Is Part Of: Journal of economics finance and administrative science. Volume 25:Issue 50(2020)
• Page Start: 185
• Page End: 204
• Publication Date: 2020-07-22
• Subjects: External debt -- Economic growth -- Macroeconomic policy -- ARDL; C32 -- H63 -- E23 -- E60; Industrial management -- Periodicals; Industrial management -- Latin America -- Periodicals; Peru -- Commerce -- Periodicals; Latin America -- Commerce -- Periodicals; Business -- Periodicals; 330
• DOI: 10.1108/JEFAS-05-2019-0069
• Languages: English
• ISSNs: 2077-1886

Abstract

Abstract : Purpose: This study aims to examine the impact of external debt on economic growth in Bangladesh within a broader macroeconomic scenario. Design/methodology/approach: In the process of doing so, it assesses the empirical cointegration, long-run and short-run dynamics of the concerned variables for the period of 1980–2017 applying the autoregressive distributed lag (ARDL) bounds testing approach to cointegration. First, debt-gross domestic product linkage explores the impact of external debt impact on economic growth using a set of macro and country risk variables, and then this linkage is also analyzed along with a newly formed macroeconomic policy (MEP) variable using principal component analysis. Findings: The study results reveal the negative impact of external debt on GDP growth, but the larger positive impact of MEP index indicates that this adverse effect of debt can be mitigated or even nullified by sound MEP and appropriate human resource policy. Originality/value: The dynamic effects of different shocks (external debt and macro policy variable) on economic growth by vector autoregression impulse response function also confirm our ARDL findings.