Debt and Economic Growth in Selected Asian Countries

Liew, Kim Hing (2020) Debt and Economic Growth in Selected Asian Countries. PhD thesis, Universiti Malaysia Sarawak (UNIMAS).

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Abstract

Over the past decades, many countries are trapped in unprecedented levels of indebtedness. Consequently, debt threshold as an indicator for utilize high external debt level effects on economic growth in which the truth is still a debate issue. Therefore, this study aims to investigate the outcomes of external debt on economic growths in different views from a sample of 16 Asian countries for the period 1980-2016. The outcomes of dataset analysis by cointegration test and error correction model, in turn, indicated that external debt, and long term external debt are negatively related and have significant impact on economic growth. Meanwhile, short term external debt tends to has positive effect on economic growth. Subsequently, external debt is negatively and significant on country’s reserves. The findings of the constructed debt threshold model revealed that external debt is negatively and significant on economic growth when its debt-to-growth ratio is above the optimal level of debt threshold. There are ten countries with debt threshold below 30%, three countries in the range between 30-60%, two countries in the range between 60-90%, and only Thailand exceeded 90% of debt threshold. Furthermore, this finding concludes that debt threshold for upper middle income Asian countries are between the ranges of 85-105%. The impact of external debt on economic growth would implicate the country's fiscal and monetary policy in safeguard the stability of economy in long run. Therefore, well fiscal discipline in utilizing external debt regards to its corresponding debt threshold would generate absolute return for economic growth. In fact, the economies in the Asian countries will continue to move forward in enhance their economies with value- added globally.

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