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Title: The Impact of External Debt on Economic Growth in Ethiopia
???metadata.dc.contributor.*???: Syed Hasan (Ph.D)
Mulugeta, Fekadu
Keywords: External Debt;Economic Growth
Issue Date: 1-Jun-2014
Publisher: A.A.U
Abstract: External debt is considered as a significant source of income for developing countries. However, a group of sub-Saharan countries classified as HIPCs including Ethiopia, have continued to experience difficulties in managing and serving their huge stock of external debt. This paper estimates empirically the impact of external debt on economic growth in Ethiopia to determine the existence of a ‘debt overhang’ and/or ‘crowding out’ effects using time series data for the period 1983/84 to 2012/13. The Johansen Maximum Likelihood approach was used to test for a long-run relationship among the variables and Vector error correction model (VECM) used to estimate the short-run impacts. The empirical result suggests the existence of longrun relationship between real GDP and external debt. The results of the study reveal that real GDP is influenced negatively by the past stock of external debt and debt servicing and, positively by the current external debt inflows. This is indicating the existence of debt overhang problem and crowding out effect in Ethiopian economy. The findings of the study indicate that exchange rate and inflation deter economic growth while, private investment and terms of trade have positive impact. Several policy implications emerge from the study. It is difficult simultaneously to achieve sustainable levels of economic growth and external debt at a moment and a country should give due attention to manage its external debt.
Description: A Thesis Submitted to The Department of Economics Presented in Partial Fulfillment of the Requirements for the Degree of Master of Science in Economics (Economic Policy Analysis)
Appears in Collections:Thesis - Economics

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