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Are the external debts of developing countries a symptom or a cause of economic slowdown?
Faculty of Business - Economics Working Papers
  • Amnon Levy, University of Wollongong
  • Khorshed Chowdhury, University of Wollongong
  • Edgar Wilson, University of Wollongong
Publication Date
1-1-1991
Abstract

In an attempt to resolve the existing controversy about the cause and effect relationship between external debt and economic slowdown, Granger causality tests are conducted with data on twenty-nine highly indebted developing countries in four distinct geographical regions. The results of these tests indicate that the Bulow-Rogoff s proposition, that the external debts of the developing countries are a symptom rather than a cause of economic slowdown, is rejected. They also indicate that the Dombusch-Krugman's proposition that the external debts lead to economic slowdown is not rejected only in the cases of several Latin-American countries and Sudan. Moreover, a feedback-type relationship is not rejected for thirteen countries. These mixed results imply that there is no general coherent relationship between external debt and economic slowdown and hence there is no unique way to remedy the failing economies of the developing countries.

Citation Information
Amnon Levy, Khorshed Chowdhury and Edgar Wilson. "Are the external debts of developing countries a symptom or a cause of economic slowdown?" (1991)
Available at: http://works.bepress.com/ewilson/18/