External Debt, Institutional Quality and Economic Growth

Deskripsi

This paper examines the role of institutional quality in the external debt–economic growth relationship. By taking a dynamic threshold specification to a panel data consisting of 53 countries, we find that external debt has an adverse effect on a country’s growth, while institutional quality improves it. We find that the effect of external debt on economic growth depends on the level of institutional quality. In addition, at a high level of external debt, the effect of institutional quality on growth is very small, suggesting that the adverse effect of external debt on a country’s economic growth holds true.