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.
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"A key model often used to show this relationship is the neoclassical growth model. Its tend to be the base of most research concerning this relationship and variables may be altered to show which variables show the most significant link, as we have done in this paper (Adegbite and Ayadi, 2008). "
"This study therefore intends to look at the direction of causation between external debt and foreign private investment in Nigeria. Adegbite et al. (2008) in their study adopted the neoclassical growth model which incorporates external sector, debt indicators and some macroeconomic variables to examine the effect of Nigerian external debt on economic development and fond among other things that there is a negative impact of debt (and its servicing requirements) on growth in Nigeria and that external debt contributes positively to growth up to a point after which its contributions become negative reflecting the presence of nonlinearity in effects. From the above, it is obvious that it is not the acquisition of external debt that is the major problem of economic growth especially in developing economies but the inappropriate application of such funds. "
[Show abstract][Hide abstract] ABSTRACT: External debt plays a major role in shaping the economic activity of any country. The purpose of the study is to determine the role of external debt on economic growth in Pakistan economy. The study incorporate Gross domestic product (GDP) as a measure of economic growth and gross domestic saving (GDS), gross capital formation (GCF) and external debt stock (EDS) as measure of economic debt. OLS regression model has been employed along with descriptive statistics over the time series data for 39 years. The statistical findings of the study reveal that gross capital formation (GCF) and external debt stock has significant positive effect on Pakistan GDP while gross domestic saving does not have significant impact on GDP of Pakistan.
International Journal of Innovation and Sustainable Development 12/2014; 5(24):140-147.
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