Research On The Impact Of External Debt On The Economic Growth Of Developing Countries

Borrowing external debt has become an important means for developing countries to develop their economies,but excessive foreign debt is not conducive to economic development.The existing literature on foreign debt and economic growth focuses on whether the impact of external debt on economic growth is positive or negative,linear or non-linear,but there is no unified conclusion,and there are few studies about the influence of different types of external debt on economic growth.This paper examines the impact and the channels of external debt on economic growth in 31 low-income countries and 107 middle-income countries between 1997 and 2018.The method used is the ARDL model.The actual per capita GDP growth rate represents the economic growth as the explanatory variable,and three models are established by the ratio of total external debt/GDP ratio,long-term external debt/total external debt ratio and short-term external debt/total reserve ratio,and government external debt/total external debt to examines the impact and its channels of three sets of external debt variables on economic growth.It is concluded that,the relationship between total external debt and economic growth is inverted U-shaped.The total external debt affects economic growth by affecting private investment,and the relationship between total external debt and private investment is also inverted U-shaped.Low-income countries are more vulnerable to the negative impact of increased external debt than middle-income countries.The relationship between long-term external debt and economic growth in the short-term and long-term is inverted U-shaped,and short-term external debt and economic growth have a linear positive correlation in the short term,and there is no significant relationship in the long run.Long-term external debt and short-term external debt also affect economic growth by affecting private investment,and the impact on private investment is also inverted U-shaped.The relationship between government external debt and economic growth is inverted U-shaped in the long run,and it is linear positive correlation in the short term.The government's external debt affects economic growth by affecting private investment and government investment.The inspiration from the conclusions of this paper is that,although borrowing foreign debt can promote economic growth in the short term,high external debt has long-term adverse effects on economic growth.Low-income countries and middle-income countries can borrow a certain level of external debt in the short term to develop the economy,but the proportion of short-term external debt cannot be too high,because the excessive proportion of short-term external debt will make these countries more vulnerable in the face of sudden changes in the international economic situation.In the long run,because the short-term external debt has limited effect on economic growth.it is necessary to minimize the proportion of long-term external debt and reduce the long-term debt burden.The government's decision to borrow foreign debt is also one of the most important factors for economic growth.Governments in developing countries must do their best when borrowing foreign debt,avoiding tax distortions caused by excessive debt and distortions in private investment.