A meta‐analysis of the relationship between debt and growth

Abstract

Purpose

Developing countries tend to be characterised by relatively high levels of indebtedness. The proceeds from debt can potentially have positive effects on growth, if the funds are employed to expand the productive capacity of the nation. The paper aims to investigate whether debt can be used to finance growth.

Design/methodology/approach

The paper utilizes meta‐analysis approach to address the issue. This approach allows researchers to combine the results from both published and unpublished research to gain insights regarding the directional and statistical significance of the relationship between the two variables.

Findings

The results suggest that there exist a positive relationship between debt and economic growth.

Research limitations/implications

The findings from the paper suggest that future research should be conscious of the effect model specification can have on the results on their studies. Indeed, when external debt, the fiscal balance, debt relief where included in the econometric specification the relationship between debt and growth was weakened.

Practical implications

Economic growth should be stimulated, if the proceeds from debt issues are utilized to finance investment in productive areas of economic activity.

Originality/value

While the relationship between debt and growth has stimulated a number of research papers, seminars and conferences, to date, however, no clear answer to the question is available. Through the use of meta‐analysis, this paper allows the reader to glean the main findings from this body of research.

Citation

Moore, W. and Thomas, C. (2010), "A meta‐analysis of the relationship between debt and growth", International Journal of Development Issues, Vol. 9 No. 3, pp. 214-225. https://doi.org/10.1108/14468951011073307