Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Financing Africa’s DevelopmentDoes the Quality of Economic Institutions Influence the Link Between External Debt and Growth? Evidence from the African Franc Zone

Financing Africa’s Development: Does the Quality of Economic Institutions Influence the Link... [The aim of this paper is to analyse the role of economic institutions in the relationship between external debt and economic growth in the African Franc zone. The methodology focuses on generalized moment method (GMM) of Blundell and Blond (1998). The sample includes 12 countries within the period 1985–2015. We adopted the classification of economic institutions proposed by Rodrik (2005) from the empirical analysis. We derive the following conclusions. Economic institutions are a brake on the economic performance of those countries: (i) Quality of market creation institutions negatively affect the debt–growth nexus in the area. Similarly, market regulatory institutions have a negative impact. (ii) Market stabilization institutions have positive effects on debt–growth nexus. In other words, to stimulate economic growth through debt, it is necessary to have better institutions in order to make external debt profitable for growth in the African Franc zone. (iii) For the whole zone, we obtain an optimal debt threshold which is 50.56% of GDP for the sample considered. ] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Financing Africa’s DevelopmentDoes the Quality of Economic Institutions Influence the Link Between External Debt and Growth? Evidence from the African Franc Zone

Download PDF
10 pages

Loading next page...
 
/lp/springer-journals/financing-africa-s-development-does-the-quality-of-economic-WOZzoqQ05B
Publisher
Springer International Publishing
Copyright
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2020
ISBN
978-3-030-46481-3
Pages
73 –83
DOI
10.1007/978-3-030-46482-0_5
Publisher site
See Chapter on Publisher Site

Abstract

[The aim of this paper is to analyse the role of economic institutions in the relationship between external debt and economic growth in the African Franc zone. The methodology focuses on generalized moment method (GMM) of Blundell and Blond (1998). The sample includes 12 countries within the period 1985–2015. We adopted the classification of economic institutions proposed by Rodrik (2005) from the empirical analysis. We derive the following conclusions. Economic institutions are a brake on the economic performance of those countries: (i) Quality of market creation institutions negatively affect the debt–growth nexus in the area. Similarly, market regulatory institutions have a negative impact. (ii) Market stabilization institutions have positive effects on debt–growth nexus. In other words, to stimulate economic growth through debt, it is necessary to have better institutions in order to make external debt profitable for growth in the African Franc zone. (iii) For the whole zone, we obtain an optimal debt threshold which is 50.56% of GDP for the sample considered. ]

Published: Jun 25, 2020

Keywords: External debt; Economic institutions; Growth; African Franc zone

There are no references for this article.