External debt and economic growth: A heterogeneous static panel study in asian developing and transition economies

Abstract

This study examined the impact of total external debt, public external debt, and private external debt on the economic growth of Asian developing and transition economies from 1995 to 2019. We applied the fixed effect model with two robust estimators of the feasible generalized least square estimator-FGLS and Driscoll-Kraay standard error-DSKE estimator to address the cross-sectional dependence, heteroscedasticity, and autocorrelation. The findings of the effect model, FGLS, and DSKE estimators show that the total external debt has a significant and positive impact on economic growth. In contrast, public external debt and private external debt harm economic growth in selected countries. The findings recommend controlling additional public and private external debt, investing in the productive sectors, motivating people about saving behaviour, concentrating on foreign trade, and foreign direct investment to resolve the indebtedness and low economic growth.