Debt and growth in developing countries  

Oleh:

Podivinsky, Jan M.

Jenis: Article from Proceeding
Dalam koleksi: SIBR-Thammasat 2014 Conference on Interdisciplinary Business & Economics Research June 5th- 7th, 2014 di Emerald Hotel Bangkok, page 1-2.
Topik: external debt; economic growth; developing countries; emerging economies.
Fulltext: b14-126.pdf (18.39KB)

Isi artikel

The relationship between levels of debt, particularly external debt, and economic growth has received considerable attention from both academics and policy makers. (see, e.g., Kumar and Woo (2010), and Panizza and Presbitero (2013)). This interest has intensified since the onset of the global financial crisis in recent years, but its roots in debt crises go back many decades (see, e.g., Reinhart and Rogoff (2013)). A particular focus of this is the recent debate generated by the research of Reinhart and Rogoff (2010). Their findings suggested the existence of a ‘debt threshold’ beyond which a country’s economic growth prospects would suffer. Despite considerable debate about these findings relating to the existence of a threshold debt/GDP ratio beyond which economic growth will suffer (see, e.g., Herndon, Ash and Pollin (2014), Pescatori, Sandri and Simon (2014), and Reinhart, Reinhart and Rogoff (2012)), the importance of modeling the role of debt for economic growth remains. Much of this recent evidence focusses primarily (and in some cases exclusively) on the experience of advanced economies. Some studies (including Reinhart and Rogoff (2010) themselves) include either emerging economies or developing countries (e.g. Eberhart and Presbitero (2013), and Mohd Daud and Podivinsky (2012)). However the debate over the existence of a ‘debt threshold’ is generally conducted with advanced economies in mind. For example, in their recently published (but heavily cited) critique of Reinhart and Rogoff (2010)’s methods, Herndon, Ash and Pollin (2014) confine themselves to replicating results from only two of Reinhart and Rogoff (2010)’s three datasets (excluding the dataset on emerging economies). They choose to “focus primarily on the 1946-2009 time period for the advanced economies, since these figures are clearly the most relevant to ongoing US and European policy debates” (p. 261). This paper attempts to redress this imbalance by considering the debt-growth evidence as it relates to developing countries, including selected emerging economies. It reviews both the existing evidence and related methodological developments (see, e.g., Stähler (2013)) and conducts a meta-analysis of the evidence. The findings emphasise that limitations of data availability for developing or emerging economies do not preclude quantifying clear relationships between debt levels and economic growth for these countries.

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