Foreign Debt and Economic Growth: Empirical Evidence from The Developing Countries
This paper empirically analyzes the relationship between foreign debt and economic growth of developing
countries and attempts to estimate debt threshold for every classification of countries by income level and lending categories
using linear as well as non-linear models. Our study is the broadest one regarding the coverage (118 developing countries)
and time period (1990 to 2015). The empirical results show that foreign debt has a non-linear effect on economic growth
regardless of in which income group and lending categories they belong to. The debt threshold is estimated from 30 percent
(countries of IDA and Blend category) to 90 percent (countries of upper-middle income group).
Keyword- economic growth, foreign debt, debt threshold, income level, lending category