



The study intends to ascertain the pathway through which foreign debt affects GDP growth in lower-middle-income countries (LMICs). High external debt stock has been major source concern for many LMICs in the late 90’s and post financial crises period. Cross-section panel data from 30 countries were studied for the period 1999–2019 using a two-step system (GMM) estimation technique. The sample LMICs were further broken into Asian and African nations and the period was divided into 2010–2019 to assess the impact of post-financial crisis events. The research revealed a strong relationship between external debt and GDP growth via total factor productivity when the entire sample of LMICs was considered. However, the estimations also indicated that TFP is not a channel of transmission in Asian nations in both eras, namely 1999–2010 and the post-financial crisis period of 2010–2019, because foreign debt reduces total factor productivity. Furthermore, considering the entire sample and the post-financial-crisis period in African countries, external debt has a negative but minor connection with TFP. GDP growth shows a large and positive association with TFP in both periods in African countries.





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Exploring the Channel of Transmission between External Debt and Economic Growth: Evidence from Lower Middle Income Countries

It is an empirical exercise to build the connection between investment in human/ physical capital and economic growth. A panel data set is targeted by considering twelve selected SAARC and ASEAN economies for the period 2005-2019. To get the empirical findings a unit root analysis is made for data stationarity; the Fully Modified Ordinary Least Square (FMOLS) method is taken in practice to find the association of the investment in human/physical capital with economic growth. Moreover, the Pedroni test is used to examine cointegration among the regressors as well as explained variables. The research outcomes highlight that the investment in the human and physical capital formation through education/health expenditures and gross fixed capital formation plays a noteworthy part in economic growth in SAARC and ASEAN economies separately and overall. Moreover, the inflationary trends and the labor force participation rate have their significance for determining economic growth. The trade volume is a significant force for the economic growth until the export proportion will be greater than imports. In a policy outlook, there is a need to enhance the fiscal budget for the health and education sector that will ultimately enhance the economic growth of the concerned economies.

Muhammad Mubashar Nasim

Papers

Empirical Analytics of SAARC vs ASEAN in Perspective of Economic Growth and Capital Accumulation