Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
권호 표지

Impact of Debts on Economic Growth of Bangladesh: An Application of ARDL Model

  • Received : 2016.05.31
  • Accepted : 2016.06.20
  • Published : 2016.06.30
Download PDF
⟨ Previous Next ⟩

Abstract

This study attempts to investigate the effects of different types of debts on economic growth in Bangladesh using time series data spanning from 2000 to 2015. In this study, the RDL model has been applied to determine the long run relationship among the selected variables. The result of the ARDL model shows that there exists a long term relationship between economic growth and the debt variables. It was evident from the findings that there exists bidirectional causality between public sector external debt and economic growth. Causality between private external debt and economic growth has been found to be insignificant. However, causality between domestic debt and economic growth showed a unidirectional causality from domestic debt to economic growth and not vice versa. Causality tests suggest that impact of domestic debt on economic growth is more effective compared to external debts.

Keywords

References

  1. Abdelhadi, S.A., (2013), "External Debt and Economic Growth: Case of Jordan (1990-2011)", Journal of Economics and Sustainable Development 4 (18), 26-32.
  2. Amassoma, D., (2011), "External debt, Internal debt and Economic Growth Bound in Nigeria using a Causality Approach", Current Research Journal of Social Sciences 3(4): 320-325, 2011.
  3. Atique, R., and Malik, K., (2012), "Impact of Domestic and External Debt on the Economic Growth of Pakistan", World Applied Sciences Journal 20(1), 120-129.
  4. Audu, I., (2004), "The impact of external debt on economic growth and public investment: The case of Nigeria", African Institute for Economic Development and Planning (IDEP), Dakar.
  5. Azam, M., Emirullah, C., Prabhakar, A.C., and Khan, A.Q., (2013), "The Role of External Debt in Economic Growth of Indonesia - A Blessing or Burden?", Middle-East Journal of Scientific Research 17 (5), 565-572.
  6. Bakar, A.N., and Hassan, S., (2008), "Empirical Evaluation on Exter-nal Debt of Malaysia", International Business & Economics Research Journal 7 (2), 95-108.
  7. Chowdhury, K., (1994), "A Structural Analysis of External Debt and Economic Growth: Some Evidence from Selected Countries in Asia and the Pacific", Applied Economics 26 (12), 1121-1131. https://doi.org/10.1080/00036849400000110
  8. Clements B, Bhattacharya R, Nguyen TQ (2003) "External debt, public investment and growth in low-income countries", IMF Working Paper WP/03/249, International Monetary Fund, Washington D.C.
  9. Engle, R. F. and C. W .J. Granger, (1987), "Co-integration and error correction: Representation, estimation and testing", Econometrics 55: 251-276. https://doi.org/10.2307/1913236
  10. Fosu, A.K., (1996), "The Impact of External Debt on Economic Growth in Sub-Saharan Africa", Journal of Economic Development 21 (1), 93-118.
  11. Hameed, A., Ashraf, H., and Chaudhary, M.A., (2008), "External Debt and Its Impact on Economic and Business Growth in Pakistan", International Research Journal of Finance and Economics 20, 132-140.
  12. Ibi, E.E. and Alfred, A., (2015), "Impact of external debt on economic growth in Nigeria: a VAR approach", Journal of Business Management and Administration Vol. 3(1): pp. 1-5, March 2015
  13. Johansen and Juselius, K., (1990), "Maximum Likelihood Estimation and Inference on Cointegration-with Applications to the Demand for Money", Oxford Bulletin of Economics and Statistics, Vol. 52, No. 2, pp. 169-210 https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
  14. Johansen, S., (1991), "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models", Econometrica, Vol. 59, No. 6, pp. 1551-1580. https://doi.org/10.2307/2938278
  15. Johansen, S., (1995), "Likelihood based inference in cointegrated vector autoregressive models", Oxford University Press (New York).
  16. Karagol, E., (2002), "The causality analysis of external debt service and GDP: The case of Turkey", Central Bank Rev. 2(1): 39-64
  17. Pesaran, M. H. and B. Pesaran (1997), Microfit 4.0, Oxford University Press.
  18. Rahman, M.M., Bashar, M.A., and Dey, S., (2012), "External Debt and Gross Domestic Product in Bangladesh: A Co-Integration Analysis", Management Research and Practice 4 (4), 28-36.
  19. Shah, M.H., and Pervin, S., (2012), "External Public Debt and Economic Growth: Empirical Evidence from Bangladesh", 1974 to 2010, Academic Research International 3 (2), 508-515.
  20. Tehereni, B.H.M., Sekhampu, T.J., and Ndovi, R.F., (2013), "The Impact of Foreign Debt on Economic Growth in Malawi", African Development Review 25 (1), 85-90. https://doi.org/10.1111/j.1467-8268.2013.12015.x
  21. Uzun, A., Karakoy, C., Kabadayi, B., and Emsen, O.S., (2012), "The Impacts of External Debt on Economic Growth in Transition Economies", Chinese Business Review 11 (5), 491-499.