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SUSTAINABILITY OF EXTERNAL DEBT IN DEVELOPING COUNTRIES AN EMPIRICAL EVIDENCE

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17 Pages : 170-184

http://dx.doi.org/10.31703/grr.2024(IX-III).17      10.31703/grr.2024(IX-III).17      Published : Sep 2024

Sustainability of External Debt in Developing Countries: An Empirical Evidence

Abstract

    The paper attempts to investigate the issue of sustainability of external debt in developing countries for the period of 1980 to 2020. We have used the standard intertemporal approach of current account balance to examine the issue of external debt sustainability. The results of standard panel cointegration models reveal that external debt in developing countries is found to be sustainable for the given period since a strong cointegration between exports and imports is found in these countries. This cointegration between exports and imports necessarily implies that developing countries are satisfying their external constraint or the solvency condition which restricts them from lending or borrowing in international financial markets for indefinite time. Besides, strong cointegration also implies that developing countries are generating enough trade surpluses today which makes them unable to finance their future external debt thereby posing no issue for the sustainability of external debt.

    Sustainability, External Debt, Cointegration, Current Account, Exports, Imports

    (1) Muhammad Haroon
    PhD Scholar, Department of Economics, International Islamic University, Islamabad, Pakistan.
    (2) Arshad Ali Bhatti
    Chairperson & Professor, Department of Economics, International Islamic University, Islamabad, Pakistan.
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APA

CHICAGO

    CHICAGO : Haroon, Muhammad, and Arshad Ali Bhatti. 2024. "Sustainability of External Debt in Developing Countries: An Empirical Evidence." Global Regional Review, IX (III): 170-184 doi: 10.31703/grr.2024(IX-III).17

HARVARD

    HARVARD : HAROON, M. & BHATTI, A. A. 2024. Sustainability of External Debt in Developing Countries: An Empirical Evidence. Global Regional Review, IX, 170-184.

MHRA

    MHRA : Haroon, Muhammad, and Arshad Ali Bhatti. 2024. "Sustainability of External Debt in Developing Countries: An Empirical Evidence." Global Regional Review, IX: 170-184

MLA

    MLA : Haroon, Muhammad, and Arshad Ali Bhatti. "Sustainability of External Debt in Developing Countries: An Empirical Evidence." Global Regional Review, IX.III (2024): 170-184 Print.

OXFORD

    OXFORD : Haroon, Muhammad and Bhatti, Arshad Ali (2024), "Sustainability of External Debt in Developing Countries: An Empirical Evidence", Global Regional Review, IX (III), 170-184

TURABIAN

    TURABIAN : Haroon, Muhammad, and Arshad Ali Bhatti. "Sustainability of External Debt in Developing Countries: An Empirical Evidence." Global Regional Review IX, no. III (2024): 170-184. https://doi.org/10.31703/grr.2024(IX-III).17