A recent analysis published in the Eurasian Economic Review investigates the impact of external debt on economic growth in South Asian countries and explores how governance plays a crucial role in moderating this relationship. The study utilizes 20 years of data (2000-2019) from South Asian economies and employs FMOLS and DOLS models for empirical analysis.
The statistical analysis reveals a significant negative effect of both long- and short-term external debts, while governance has a significant positive effect on economic growth. In addition, the positive moderating role of governance was also observed in the nexus of external debt and economic growth. Enhancing governance can make external borrowing beneficial for economic progress.
The study emphasizes the importance of enhancing governance to ensure beneficial utilization of external borrowing for economic progress and suggests policies for reducing external borrowings, improving governance quality, and effectively utilizing external debt for development projects.
For more details and a comprehensive understanding of the study, you can access the full article through the provided DOI link: https://doi.org/10.1007/s40822-024-00264-0
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