Does Extrrnal Public Debt Affect Ethiopla's Economic Growth?

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Ethiopia is a highly indebted poor country (HIPC), but empirical research concerning about the relationship between external debt and growth is lacking and ambiguous. In the current research, Auto-Regressive Distributed Lag Model (ARDL) is used to evaluate the connection between Ethiopia's real GDP and external debt, utilizing yearly time series secondary data beginning from 1985 to 2021. The outcome demonstrates that the total stock of external debt has a significant negative relationship with its real GDP. However, the aggregate amount of lagged debt service has a short-run positive influence on the country’s economic growth. This reveals there is a debt overhang effect but not a crowding-out impact. Additionally, labor force and internal conflict exert a negative influence on the nation's real GDP in the short run, while gross capital formation and trade openness have a positive impact. Only gross capital formation and total amount of external debt have long-run positive and negative relationship with real GDP, respectively. The study provides a definite response to the topic of how foreign public debt affects Ethiopian economic growth



ARDL, Ethiopia, External Debt, Gross Capital Formation, HIPC, Real GDP