The relationship between external debt and economic growth: empirical evidence from Ukraine and other emerging economies

  • Received March 3, 2018;
    Accepted April 3, 2018;
    Published April 6, 2018
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  • Article Info
    Volume 15 2018, Issue #1, pp. 387-400
  • Cited by
    20 articles

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The article examines the relationship between external debt and economic growth in emerging economies for the period 2006-2016. The authors used different econometric tools, e.g., ADL model and correlation analysis. The regression results showed that the original values had no significant impact on the estimation of the parameters. Thus, there was made an assumption that emerging economies have a non-linear impact on macroeconomic parameters, including external debt that has a non-linear type of influence on economic growth. The authors established that high level of external debt, in conjunction with macroeconomic instability, impedes economic growth in such countries. The regression model also showed that there is a critical level of debt burden for emerging economies, where the marginal impact of external debt on economic growth becomes negative.
The results of the study highlighted the significance of the problem of effective public debt management strategy implementation in Ukraine. This issue is predetermined by the appropriate organizational support. The study recommends improving a public external debt management model. In this paper, the authors proposed a new structure with the participation of new element – independent agencies. The unified external debt management system should integrate all state institutions and executive power structures in this area.

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    • Figure 1. Gini index growth rates in emerging economies (2015 compared with 2005)
    • Figure 2. Annual growth rates of GDP and total debt service on external debt in emerging economies, 2005−2016
    • Figure 3. Matrix of correlation of present value of external debt per capita and GDP per capita in emerging economies, 2016
    • Figure 4. The dynamics of the payments on public domestic debt, payments on the public external debt and the ratio of payment on public debt to GDP in Ukraine, 2006‒2016
    • Figure 5. Institutional model of the public external debt management
    • Table 1. Overview of model
    • Table 2. ANOVA of model
    • Table 3. T-test and estimation of regression coefficients for model
    • Table 4. Correlation matrix
    • Table 5. Institutional models of the external public debt management