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The effect of foreign debt on the economic growth

This study examines the effect of foreign debt on the economic growth. Using a time series Indonesian data over 1981 - 2017, we employ the Error Correction Model based on the debt overhang theory. Foreign debt was found to produce negative and significant effect on the economic growth both in the sh...

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Main Author: Kurniasih, Erni Panca
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2021
Online Access:http://journalarticle.ukm.my/18803/1/jeko_553-9.pdf
http://journalarticle.ukm.my/18803/
https://www.ukm.my/jem/issue/v55i3/
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spelling my-ukm.journal.188032022-06-23T08:46:30Z http://journalarticle.ukm.my/18803/ The effect of foreign debt on the economic growth Kurniasih, Erni Panca This study examines the effect of foreign debt on the economic growth. Using a time series Indonesian data over 1981 - 2017, we employ the Error Correction Model based on the debt overhang theory. Foreign debt was found to produce negative and significant effect on the economic growth both in the short- and long-run. The paper further found that Foreign Direct Investment (FDI) improves the economic growth. Foreign debt that continues to increase drastically in the long-run could slow down the economic growth which may indicate the economy experiencing a debt overhang. It is thus imperative for the government to ensure the debt ratio remain below a certain threshold. Further, foreign debt should be prioritized to develop infrastructure with a broad multiplier effect and the FDI likewise prioritized for labor-intensive sectors. Penerbit Universiti Kebangsaan Malaysia 2021 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/18803/1/jeko_553-9.pdf Kurniasih, Erni Panca (2021) The effect of foreign debt on the economic growth. Jurnal Ekonomi Malaysia, 55 (3). pp. 125-136. ISSN 0127-1962 https://www.ukm.my/jem/issue/v55i3/
institution Universiti Kebangsaan Malaysia
building Tun Sri Lanang Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Kebangsaan Malaysia
content_source UKM Journal Article Repository
url_provider http://journalarticle.ukm.my/
language English
description This study examines the effect of foreign debt on the economic growth. Using a time series Indonesian data over 1981 - 2017, we employ the Error Correction Model based on the debt overhang theory. Foreign debt was found to produce negative and significant effect on the economic growth both in the short- and long-run. The paper further found that Foreign Direct Investment (FDI) improves the economic growth. Foreign debt that continues to increase drastically in the long-run could slow down the economic growth which may indicate the economy experiencing a debt overhang. It is thus imperative for the government to ensure the debt ratio remain below a certain threshold. Further, foreign debt should be prioritized to develop infrastructure with a broad multiplier effect and the FDI likewise prioritized for labor-intensive sectors.
format Article
author Kurniasih, Erni Panca
spellingShingle Kurniasih, Erni Panca
The effect of foreign debt on the economic growth
author_facet Kurniasih, Erni Panca
author_sort Kurniasih, Erni Panca
title The effect of foreign debt on the economic growth
title_short The effect of foreign debt on the economic growth
title_full The effect of foreign debt on the economic growth
title_fullStr The effect of foreign debt on the economic growth
title_full_unstemmed The effect of foreign debt on the economic growth
title_sort effect of foreign debt on the economic growth
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2021
url http://journalarticle.ukm.my/18803/1/jeko_553-9.pdf
http://journalarticle.ukm.my/18803/
https://www.ukm.my/jem/issue/v55i3/
_version_ 1736834968015863808
score 13.211869

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