Search results

1 – 10 of over 72000
To view the access options for this content please click here
Article
Publication date: 10 August 2020

Waliu Olawale Shittu, Nor Asmat Ismail, Abdul Rais Abdul Latiff and Hammed Oluwaseyi Musibau

Amongst the major concerns of sub-Sahara Africa are the rising external debt and poor performances in governance. This paper aims to lend a voice to the relevance of…

Abstract

Purpose

Amongst the major concerns of sub-Sahara Africa are the rising external debt and poor performances in governance. This paper aims to lend a voice to the relevance of governance on the relationship between external debt and economic growth in selected five sub-Saharan African (SSA) countries.

Design/methodology/approach

Using available data from the World Governance and Development Indicators, between 1996 and 2016, the study uses the fully-modified OLS technique after establishing the absence of unit root and existence of long-run relationship amongst the variables of the model.

Findings

The findings confirm a non-linear relationship between external debt and economic with a positive net effect of $5.05 increase in economic performance for a US$ rise in external debt. While the index of governance depicts a negative association with economic growth, the indicators show mixed results. The interaction effect of external debt and governance on economic performance explain that improved governance quality reduces its negative effect on economic performance by US$1.288 (with a total effect of –4.180 + 1.288*EXDBT); it equally enhances the (net) positive impact of external debt by US$1.288 (with a total effect 5.05 + 1.288*IQ).

Practical implications

The governments of the selected countries are, therefore, advised to seek other means of financing their expenditure while curbing financial mismanagement and its long-term impacts on growth. Also, governance infrastructures should be improved to restore both domestic and foreign investors’ confidence so that more private capitals may be attracted in lieu of excessive borrowings.

Originality/value

The research is the first to comprehensively examine the nexus between external debt, governance and economic growth in the selected countries, given their external debt position in SSA. This includes examining the impacts of each of the governance indicators and the comprehensive index of governance on growth. Furthermore, the study adds to the literature by examining the interaction effects of external debt and governance on economic growth of these countries. This gives both the partial and total estimates of the effects of external debt and governance on economic growth in the countries under consideration.

Details

Journal of Financial Crime, vol. 27 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

To view the access options for this content please click here
Article
Publication date: 14 August 2017

David Mensah, Anthony Q.Q. Aboagye, Joshua Y. Abor and Anthony Kyereboah-Coleman

The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the…

Abstract

Purpose

The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the consequences of such odious debt. The purpose of this paper is to establish the factors that contribute to the growth rate of external debt and how these factors respond to shocks to external debt growth rate in Africa.

Design/methodology/approach

Data were obtained from 24 African countries and analyzed using a panel vector autoregression estimation methodology.

Findings

The study found that external debt growth rates respond positively to unit shock or changes in government investment spending, consumption spending, and domestic borrowings over a long period of time. In the medium term, external debt growth rates respond negatively to shocks in tax revenue, inflation, and output growth rates. The paper also provides empirical support that external debt may be consumed rather than invested among HIPCs in Africa.

Research limitations/implications

The findings of this paper are limited to only HIPCs in Africa.

Practical implications

This study has some few debilitating implications for external debt management among HIPCs in Africa. First, the paper suggests that debt repayment may be a problem. This is largely because external debt is consumed rather than invested. External debt sustainability needs a holistic approach in less developed countries. The findings place much emphasis on improvements in gross domestic product and tax revenues as the principal routes out of the debt doldrums. However, this option must be exploited with great caution as there is ample evidence that these poor countries increase their external borrowing capacities with improvements in economic outlook.

Originality/value

This paper fills a research gap that identifies specific components of government deficit budgets that may be contributing to the growth rate of external debts among HIPCs.

Details

Journal of Economic Studies, vol. 44 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Content available
Article
Publication date: 28 July 2020

Sima Rani Dey and Mohammad Tareque

This study aims to examine the impact of external debt on economic growth in Bangladesh within a broader macroeconomic scenario.

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.

Details

Journal of Economics, Finance and Administrative Science, vol. 25 no. 50
Type: Research Article
ISSN: 2077-1886

Keywords

To view the access options for this content please click here
Article
Publication date: 3 April 2018

Pradeepta Sethi

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the…

Abstract

Purpose

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the banks, stock and bond markets.

Design/methodology/approach

The authors apply panel fixed-effects and dynamic panel generalized methods of moments on disaggregated industry-level data of the Indian manufacturing sector for the period of 2001-2015 to examine the relationship between financial development, banking market structure and economic growth.

Findings

The study finds that financial development has a significant impact on the growth process by reducing cost of external finance. Among the three sources of finance, the study finds that while the banking sector has been the most preferred source of external finance, increasing concentration and selective disbursement of credit have continued to dent the prospects of the industry. This paradoxical result explains the dismal performance of the Indian manufacturing sector.

Originality/value

The effect of financial development (encompassing banking market structure) on economic growth has received sparing attention. Related literature is unclear regarding the impact of banking market structure on the growth process in the context of emerging economies. The authors attempt to fill this important gap in the literature. Moreover, they add novelty to the literature by calculating the external dependence at the firm level, diverging from using US industry as a proxy for calculation of external dependence.

To view the access options for this content please click here
Book part
Publication date: 1 April 2006

Channing Arndt, Sam Jones and Finn Tarp

We consider the relationship between external aid and development in Mozambique from 1980–2004, identifying the specific mechanisms through which aid has influenced the…

Abstract

We consider the relationship between external aid and development in Mozambique from 1980–2004, identifying the specific mechanisms through which aid has influenced the developmental trajectory of the country. We undertake both a growth accounting analysis and review the intended and unintended effects of aid at the micro-level. Sustained aid flows to Mozambique, in conflict and post-conflict periods, have made an unambiguous, positive contribution to rapid growth since 1992. However, proliferation of donors and aid-supported interventions has burdened local administration, indicating a need for deeper domestic government accountability. To sustain growth, Mozambique must maximize benefits from natural resources while promoting constructive international market integration.

Details

Theory and Practice of Foreign Aid
Type: Book
ISBN: 978-0-444-52765-3

To view the access options for this content please click here
Article
Publication date: 2 March 2015

Naeem Akram

Over the years most of the developing countries have failed to collect enough revenues to finance their budgets. As a result, they have to face the problem of twin…

Abstract

Purpose

Over the years most of the developing countries have failed to collect enough revenues to finance their budgets. As a result, they have to face the problem of twin deficits and to rely on external and domestic debt to finance their developmental activities. The positive effects of public debt relate to the fact that in resource-starved economies debt financing (if done properly) leads to higher growth and adds to their capacity to service and repay external and internal debt. The negative effects work through two main channels – i.e., “Debt Overhang” and “Crowding Out” effects. The purpose of this paper is to examine the consequences of public debt for economic growth and investment for the Philippines.

Design/methodology/approach

The present study examines the consequences of public debt for economic growth and investment for the Philippines during the period 1975-2010, by using autoregressive distributed lag technique.

Findings

The results reveal that in the Philippines, public external debt has negative and significant relationship with economic growth and investment confirming the existence of “Debt Overhang effect”. But due to insignificant relationships of debt servicing with investment and economic growth, the existence of the crowding out hypothesis could not be confirmed. The domestic debt has a negative relationship with investment and positive relationship with economic growth.

Research limitations/implications

First and foremost implication of the study is that heavy reliance on external debt must be discouraged. Therefore, in order to accelerate economic growth, developing countries must adopt those policies that are likely to result in reducing their debt burden, and it must not be allowed to reach unsustainable level. In the case of domestic debt, the present study finds that investment is negatively affected by domestic debt due to the crowding out effect; yet real GDP has a positive relationship with domestic debt. Thus, if policy makers want to use domestic debt as a tool to stimulate real GDP then it must keep an eye on the consequences of domestic debt on the investment.

Practical implications

First and foremost implication of the study is that heavy reliance on external debt must be discouraged. Therefore, in order to accelerate economic growth, the Philippines must adopt those policies that are likely to result in reducing their debt burden, and external debt it must not be allowed to reach unsustainable level. In the case of domestic debt, the present study finds that investment is negatively affected by domestic debt due to the crowding out effect; yet real GDP has a positive relationship with domestic debt. Thus, if policy makers want to use domestic debt as a tool to stimulate real GDP then it must keep an eye on the consequences of domestic debt for on the investment.

Social implications

It also follows from the estimation results that population growth rate is harmful for the economic growth. So in order to stimulate the growth performance, it must adopt effective population control policies. Similarly, since openness and investment are growth enhancing so there is need for the trade and investment supportive policies.

Originality/value

From the review of literature on the issue, it can be broadly summarized that most of the studies are on the relationship of external debt and economic growth, neglecting domestic debt entirely or mentioning it in the passing. Second, most of these studies have been conducted by using panel data. However, as the different countries vary in socio-economic conditions so it is better to conduct the country specific study. The present study is an attempt to fill these gaps in the existing literature.

Details

International Journal of Social Economics, vol. 42 no. 3
Type: Research Article
ISSN: 0306-8293

Keywords

To view the access options for this content please click here
Article
Publication date: 25 February 2014

Andrea Furlan, Roberto Grandinetti and Adriano Paggiaro

Business research and entrepreneurship literature typically examines external resources as input or output of entrepreneurial (or high) growth. The purpose of this paper…

Abstract

Purpose

Business research and entrepreneurship literature typically examines external resources as input or output of entrepreneurial (or high) growth. The purpose of this paper is to combine these two perspectives in describing and modeling high growth.

Design/methodology/approach

The study tests the hypotheses on a sample of medium-sized, established manufacturing firms using structural equation modeling.

Findings

Results provide original contributions to the business research on firm growth and entrepreneurship. They are consistent with studies advocating the importance of adopting a process perspective when studying business growth to probe the causal mechanisms behind growth.

Research limitations/implications

Being quantitative, this study does not address the dynamic interdependencies between proprietary and hybrid growth. However, the literature on entrepreneurship would benefit from qualitative studies that explore how successful and sustainable growth processes combine the two modes of growth.

Originality/value

Findings partially discard the input and output approach in favor of a vision of entrepreneurial growth as a process that unfolds over time with the development of external relationships. Only the process of collaboration, a core competence of entrepreneurial firms, reduces information asymmetries and agency problems, thus turning the corresponding inter-organizational relationships into formidable feeders of firm growth. Entrepreneurial growth is in fact a process that needs external relationships in order to flourish over time.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 20 no. 1
Type: Research Article
ISSN: 1355-2554

Keywords

To view the access options for this content please click here
Article
Publication date: 2 July 2008

Esther O. Adegbite, Folorunso S. Ayadi and O. Felix Ayadi

This paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the Nigerian economy so as to make meaningful…

Abstract

Purpose

This paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the Nigerian economy so as to make meaningful inference on the impact of the debt relief which was granted to the country in 2006.

Design/methodology/approach

The neoclassical growth model which incorporates external sector, debt indicators and some macroeconomic variables was employed in this study. The paper investigates the linear and nonlinear effect of debt on growth and investment utilizing the ordinary least squares and the generalized least squares.

Findings

Among other things, the negative impact of debt (and its servicing requirements) on growth is confirmed in Nigeria. In addition, external debt contributes positively to growth up to a point after which its contributions become negative reflecting the presence of nonlinearity in effects.

Originality/value

Nigeria's external debt is analyzed in a new context utilizing a different but innovative model and econometric techniques. It is of tremendous value to researchers on related topic and an effective policy guide to policymakers in Nigeria and other countries with similar characteristics.

Details

International Journal of Emerging Markets, vol. 3 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here
Article
Publication date: 13 July 2018

Waliu Olawale Shittu, Sallahuddin Hassan and Muhammad Atif Nawaz

The purpose of this paper is to examine the impact of external debt and corruption on economic growth in the selected five Sub-Saharan African (SSA) countries, from 1990 to 2015.

Abstract

Purpose

The purpose of this paper is to examine the impact of external debt and corruption on economic growth in the selected five Sub-Saharan African (SSA) countries, from 1990 to 2015.

Design/methodology/approach

Panel unit root and panel cointegration tests are employed to test for stationarity of the series and the long-run relationship, respectively. Fully modified OLS and dynamic OLS techniques are also employed to examine the long-run coefficients of the variables of the model, as well as panel Granger causality test, in order to examine the direction of causality among the variables.

Findings

The results indicate that there is a negative relationship between external debt and economic growth, as well as a bi-directional causality between the two variables. The findings also indicate a positive relationship between corruption and economic growth, as well as a uni-directional causality running from economic growth through corruption.

Research limitations/implications

The study recommends that the governments of the selected countries should address the menace of rising external debt through the adoption of other sources of capital for investment. Such include more openness of the economy for more capital, by easing restrictions on genuine imports and exports of valuable goods and services. It also suggests that the issue of corruption be tackled head-on, by such penalties that tend to make corruption less attractive.

Originality/value

While the relationship between economic growth and external debt, on the one hand, and corruption and economic growth, on the other hand, have received considerable attentions, the trio of external debt, corruption and economic growth have not been found combined in a model, to the best of the authors’ knowledge. Also, the countries under consideration, who jointly account for about 47 percent of the entire SSA countries’ stock of external debt, have not been jointly found in any recent panel studies involving the selected variables.

Details

African Journal of Economic and Management Studies, vol. 9 no. 3
Type: Research Article
ISSN: 2040-0705

Keywords

To view the access options for this content please click here
Article
Publication date: 30 August 2013

Georgios Papanastasopoulos, Dimitrios Thomakos and Tao Wang

The purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth

Abstract

Purpose

The purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth indicator: free cash flow yield (free cash flows scaled by price).

Design/methodology/approach

The paper utilizes portfolio‐level tests and cross‐sectional regressions.

Findings

In line with the literature on contrarian portfolios, this paper finds that firms with low (high) free cash flow yield are experiencing low (high) returns. However, only when an investor buys (sells) stocks of firms with high (low) free cash flow yield that distribute (raise) capital, his zero‐cost portfolio is significant. These findings are robust, irrespective of the financing vehicle (equity or debt). Overall, their evidence suggests that distinctions between the value/growth anomaly and the external financing anomaly partially disappear, if one is willing to employ free cash flow yield as a proxy of the former anomaly.

Originality/value

The paper enhances one's understanding of the relation between asset pricing anomalies.

Details

Journal of Economic Studies, vol. 40 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

1 – 10 of over 72000