The impact of external debt on economic growth: The case of emerging countries

Abstract

This article empirically examines the impact of external debt on economic growth in emerging economies from 1990 to 2022, considering the effects of globalization. Using a deductive methodology that combines a comprehensive literature review with econometric analysis, particularly a fixed-effects panel model, the results reveal a nonlinear relationship between external debt and economic growth. Although an increase in the stock of external debt initially stimulates growth, excessive debt accumulation leads to diminishing returns and negative effects on growth. These results underscore the importance of prudent debt management, especially in the context of globalization, where emerging economies are more exposed to external shocks.

Keywords

• External debt
• Economic growth
• Emerging economies
• Globalization
• Panel model
• Non-linear relationship