Elkhal i, Oussama e al.
A icle
The impac o ex e nal deb on economic g ow h: The case
o eme ging coun ies
Resea ch in Globaliza ion
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Sugges ed Ci a ion: Elkhal i, Oussama e al. (2024) : The impac o ex e nal deb on economic g ow h:
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The impac o ex e nal deb on economic g ow h: The case o
eme ging coun ies
Oussama Elkhal i
a,*
, Rachid Chaabi a
b
, Mouni Benboubke
a
, Mousaab Ghoujdam
c
,
Kamal Zah aoui
d
, Hicham El Alaoui
e
, Sa a Laalam
, Ismail Belhaj
a
, Hind Hammouch
g
a
Sidi Mohamed Ben Abdellah Uni e si y, FSJES, Fes, Mo occo
b
Hassan II Uni e si y, FSJES, Casablanca, Mo occo
c
BIGOFCF, Hassan II Uni e si y, Casablanca, Mo occo
d
Hassan II Uni e si y, FSJES, Casablanca, Mo occo
e
BIGOFCF, Hassan II Uni e si y –FSJES, Casablanca, Mo occo
Hassan II Uni e si y –FSJES, Casablanca, Mo occo
g
Economics and Managemen , Sidi Mohamed Ben Abdellah Uni e si y, FSJES, Fes, Mo occo
ARTICLE INFO
JEL codes:
F34
F43
O11
O40
O47
C33
Keywo ds:
Ex e nal deb
Economic g ow h
Eme ging economies
Globaliza ion
Panel model
Non-linea ela ionship
Deb o e hang
ABSTRACT
This a icle empi ically examines he impac o ex e nal deb on economic g ow h in eme ging economies om
1990 o 2022, conside ing he e ec s o globaliza ion. Using a deduc i e me hodology ha combines a
comp ehensi e li e a u e e iew wi h econome ic analysis, pa icula ly a ixed-e ec s panel model, he esul s
e eal a nonlinea ela ionship be ween ex e nal deb and economic g ow h. Al hough an inc ease in he s ock o
ex e nal deb ini ially s imula es g ow h, excessi e deb accumula ion leads o diminishing e u ns and nega i e
e ec s on g ow h. These esul s unde sco e he impo ance o p uden deb managemen , especially in he
con ex o globaliza ion, whe e eme ging economies a e mo e exposed o ex e nal shocks.
In oduc ion
Du ing he 1980s, he economic en i onmen o eme ging coun ies
was ma ked by a deb c isis. The deb c isis began in Augus 1982, when
Mexico announced ha i was suspending paymen on i s ex e nal deb .
This deb c isis in eme ging coun ies was p ima ily due o poo deb
managemen , i a ional esou ce alloca ion, alling commodi y p ices,
and ising in e es a es in he in e na ional inancial ma ke . These
ac o s, exace ba ed by he dynamics o globaliza ion, led o a decline in
in es men s, a c ucial d i e o economic g ow h.
The impac o ex e nal deb on economic g ow h is c ucial in a glo-
balised wo ld whe e in e na ional inancial lows a e cen al. Global-
iza ion has acili a ed eme ging economies’ access o inancial ma ke s,
s imula ing hei de elopmen while inc easing hei ulne abili y o
global economic shocks. Financial c ises, such as he Asian c isis o 1997
and he global inancial c isis o 2008, as well as he economic e-
pe cussions o he COVID-19 pandemic, ha e exace ba ed hese ul-
ne abili ies. While globaliza ion o e s inancing oppo uni ies, i also
exposes hese coun ies o global inancial c ises, demons a ing ha
inapp op ia e deb managemen can lead o c ises wi h global e-
pe cussions (Eicheng een, 2004; S igli z, 2002). This dynamic highligh s
he complex impac o globaliza ion on he ela ionship be ween
ex e nal deb and economic g ow h.
The s uc u al adjus men policies o he IMF and Wo ld Bank, such
as cu s in public spending and p i a iza ion, we e in ended o s abilize
eme ging economies, bu ha e o en exace ba ed inequali ies and
inc eased dependence on ex e nal deb . In he con ex o globaliza ion,
hese measu es ha e ampli ied local and global economic ulne abili ies
* Co esponding au ho .
E-mail add ess: [email p o ec ed] (O. Elkhal i).
Con en s lis s a ailable a ScienceDi ec
Resea ch in Globaliza ion
jou nal homepage: www.sciencedi ec .com/jou nal/ esea ch-in-globaliza ion
h ps://doi.o g/10.1016/j. esglo.2024.100248
Recei ed 23 Ap il 2024; Recei ed in e ised o m 20 Augus 2024; Accep ed 22 Augus 2024
Resea ch in Globaliza ion 9 (2024) 100248
A ailable online 28 Augus 2024
2590-051X/© 2024 The Au ho (s). Published by Else ie L d. This is an open access a icle unde he CC BY-NC license ( h p://c ea i ecommons.o g/licenses/by-
nc/4.0/ ).
(Williamson, 2004).
The ea lies heo e ical o mula ion add essing he impac o
ex e nal deb on economic g ow h was de eloped in he la e 19 h cen-
u y by Cai nes (1874) and Bas able (1989). This heo y, known as he
“g ow h heo y ansmi ed by capi al mo emen s” o he heo y o he
s ages o he balance o paymen s (BP),
1
laid he g oundwo k o un-
de s anding in e na ional capi al lows in he con ex o eme ging
globaliza ion. La e wo ks, such as hose by K ugman (1988a,1988b),
Sachs (1988), and Cohen (1993), ga e ise o he deb o e hang heo y.
This heo y highligh s ha beyond a ce ain h eshold, ex e nal deb
discou ages consump ion and in es men , he eby limi ing economic
g ow h. This phenomenon is pa icula ly p onounced in eme ging
coun ies, whe e massi e bo owing o inance economic and social
de elopmen , combined wi h ine ec i e deb managemen , has led o
deb c ises exace ba ed by he dynamics o globaliza ion.
Wi h his in mind, he p ima y objec i e o his s udy is o analyze he
impac o ex e nal deb on economic g ow h in eme ging coun ies
wi hin a globalized amewo k and o iden i y he mechanisms in lu-
encing his deb . This esea ch makes se e al impo an con ibu ions o
he exis ing li e a u e: i p o ides an upda ed empi ical analysis wi h
ecen da a, explo es in dep h he impac mechanisms wi hin a global-
ized con ex , and o e s policy ecommenda ions o e ec i e ex e nal
deb managemen . Howe e , he cu en li e a u e has signi ican gaps,
including a lack o consensus on he ne e ec o ex e nal deb on eco-
nomic g ow h, wi h s udies sugges ing ei he posi i e e ec s o isks o
o e -indeb edness. Fu he mo e, he in eg a ion o globaliza ion pe -
spec i es is o en limi ed, and quan i a i e esea ch wi h obus econo-
me ic me hods emains insu icien o add ess causali y issues and ully
explo e how globaliza ion in luences hese dynamics.
Thus, he cen al ques ion o his s udy is: Wha is he impac o
ex e nal indeb edness on economic g ow h in eme ging coun ies, and
how do globaliza ion p ocesses modula e his impac ?
This a icle uses an econome ic model o analyze he impac o
ex e nal deb on economic g ow h in eme ging coun ies. The esul s
show a signi ican posi i e e ec o he s ock o ex e nal deb , bu a
nega i e e ec due o o e -indeb edness. The s udy also includes con ol
a iables such as human and physical capi al, as well as globaliza ion
a iables such as commodi y p ices and ade openness. These global-
iza ion a iables modi y he ela ionship be ween ex e nal deb and
g ow h, ampli ying he s uc u al challenges acing hese economies.
The conclusions highligh he need o mo e e ec i e deb managemen
in a globalised con ex .
This s udy adop s a deduc i e app oach using quan i a i e me hods.
I begins wi h a e iew o he heo e ical and empi ical li e a u e on
ex e nal deb , economic g ow h, and he impac o globaliza ion.
Desc ip i e analyses a e hen conduc ed o examine he s uc u e and
e olu ion o he s udied a iables. Finally, an econome ic analysis using
a panel model is pe o med o assess he impac o public ex e nal deb
on economic g ow h, conside ing globaliza ion, o he pe iod
1980–2022, using EVIEWS 10 so wa e.
Li e a u e e iew
Concep ual analysis o ex e nal deb
Analysis o he impac o ex e nal deb on economic g ow h equi es
i s o all cla i ica ion o he concep o ex e nal deb . Indeed, he
ex e nal deb o a coun y includes all he loans con ac ed by he S a e,
i s dismembe men s wi h i s gua an ee and e en by companies ac ing on
behal o he S a e (public ex e nal deb ) o by p i a e economic ope -
a o s (p i a e ex e nal deb ) wi h espec o o eign coun ies. Depend-
ing on he na u e o he c edi o , he ex e nal deb may ake se e al
o ms, o example:
Mul ila e al deb : i he loan is ob ained om a mul ila e al o gani-
za ion ( he Wo ld Bank, he In e na ional Mone a y Fund, egional
de elopmen banks and unds such as he A ican De elopmen Bank
(ADB), e c).
Bila e al deb : i he c edi o is ano he coun y, i s escheduling and
cancella ion a e nego ia ed wi hin he Pa is Club.
2
Comme cial o bank deb : i he c edi o is an ex e nal p i a e bank
(Ci y Bank, Chase Mana han Bank, e c.), i s escheduling is nego ia ed
wi hin he London Club.
3
Theo e ical li e a u e e iew
His o ically, he i s economic heo ies conside ed economic g ow h
o be an exogenous phenomenon, de e mined mainly by na u al ac o s
and echnical e en s (Bas able, 1989; Cai nes, 1874). Howe e , endog-
enous g ow h heo ies ha e subsequen ly emphasised he c ucial ole o
in es men in esea ch and de elopmen , in as uc u e and o he public
spending in he g ow h dynamic, especially in eme ging coun ies whe e
ex e nal deb plays a cen al ole (Ba o, 2001; Lucas, 1988).
Wi h he eme gence o globaliza ion, economic heo ies ha e
e ol ed o inco po a e new con ex ual challenges. The heo y o
excessi e deb , de eloped by K ugman (1988a,1988b), Sachs (1988),
and Cohen (1993), illus a es how ex e nal indeb edness, beyond a
ce ain h eshold, can hinde in es men and consump ion, he eby
limi ing economic g ow h. This phenomenon is pa icula ly ele an in a
globalized con ex , whe e eme ging economies a e exposed o luc ua-
ions in in e na ional inancial ma ke s.
Globaliza ion has ans o med he dynamics o ex e nal indeb edness
by acili a ing eme ging economies’ access o in e na ional inancial
ma ke s. Eicheng een and Hausmann (2005) no ed ha his inc eased
in eg a ion exposes hese coun ies o global economic shocks and a -
ia ions in in e na ional in e es a es, aising he isks o excessi e
dependence and deb c ises. Reinha and Rogo (2009) obse ed ha
globaliza ion in ensi ies deb isks by ampli ying he e ec s o global
economic luc ua ions.
In addi ion, heo ies on ex e nal deb and economic g ow h can be
g ouped in o h ee main app oaches:
Nega i e app oach: Acco ding o classical heo y, ex e nal deb is
pe cei ed as a u u e bu den ha can slow down capi al accumula ion
and educe consump ion. Rica do and Ba o (1989) a gue ha public
bo owing is o en pe cei ed as a de e ed ax, which leads indi iduals
o inc ease hei sa ings in an icipa ion o u u e ax bu dens, and o
educe hei cu en consump ion. This app oach sugges s ha , when i
exceeds a ce ain h eshold, ex e nal deb can ha e a nega i e e ec on
economic g ow h by limi ing he esou ces a ailable o p oduc i e in-
es men and by imposing cons ain s on household consump ion. So,
a om s imula ing g ow h, ex e nal deb can ac ually slow economic
expansion by inc easing he u u e cos s associa ed wi h deb
epaymen s.
1
Fo his heo y, coun ies a he beginning o hei g ow h do no ha e
su icien sa ings, which inc eases in e es a es. Ex e nal capi al is in es ed in
hese coun ies, and allows hem o g ow u he . This will allow o an inc ease
in income and he e o e in in e nal sa ings, which will g adually eplace
ex e nal sa ings. This inc ease in income will lead o an inc ease in addi ional
ax e enues. As i leads o an inc ease in o eign exchange ea nings h ough he
g ow h o expo s, he ade balance becomes posi i e. The inc ease in in e nal
sa ings will lead o a dec ease in in e es a es. This will encou age he in-
es men o capi al ab oad as he income balance becomes posi i e. Finally, he
las s age is when ex e nal income has eached such a le el ha he e ms o
ade o he capi al-expo ing coun y de e io a e. This is due o he inc ease in
he exchange a e, and i s co olla y is he ade balance de ici . Acco ding o
Jan Tinbe gen In gene al, go e nmen s implemen ac ions, coo dina ed in
economic policies o achie e ce ain ends.
2
G oup o he main c edi o s a es. P esidency and sec e a ia a e p o ided
by he F ench T easu y.
3
G ouping o nego ia ion be ween deb o go e nmen s and c edi o banks.
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
2
Complemen a y app oach: A amo ic (1964) deb cycle heo y
sugges s ha ex e nal deb can ini ially s imula e in es men and eco-
nomic g ow h by compensa ing o a domes ic sa ings de ici , a phe-
nomenon pa icula ly ele an o eme ging economies. This heo y is
di ided in o h ee phases: i s , an inc eased dependence phase whe e
coun ies, lacking domes ic sa ings, use deb o inance essen ial in-
es men s, leading o a high eliance on his deb o suppo economic
g ow h. Nex , a ansi ion phase whe e in es men s unded by deb in-
c ease domes ic sa ings, g adually educing eliance on ex e nal deb .
Finally, he ma u i y phase is cha ac e ized by domes ic sa ings
exceeding in es men needs, leading o s agna ion in ex e nal deb and
inancial consolida ion.
Howe e , his heo y has limi a ions in he con ex o eme ging
coun ies. Many o hese coun ies emain apped in he i s phase,
wi h pe sis en deb dependence despi e insu icien g ow h in domes ic
sa ings, p e en ing he ansi ion o la e phases. Rugge i-Lade chi,
S ewa , and Co nia (2020) no e ha his pe sis ence and s uc u al
economic challenges complica e he ull applica ion o he heo y,
exace ba ing he economic ulne abili ies o eme ging coun ies.
Non-linea app oach: Non-linea models o deb o e hang show ha
he impac o ex e nal deb on economic g ow h becomes nega i e
beyond a c i ical h eshold, as shown by Sachs (1988), Cohen (1993)
and Ra ino (1998). This phenomenon is exace ba ed by he p ima y
deb bu den, comp ising in e es and amo isa ion paymen s, and by he
i ual bu den, which inc eases expec a ions o u u e axes. K ugman
(1988a,b) adds ha his si ua ion es ic s p oduc i e in es men , as
esou ces a e di e ed om economic de elopmen o deb se icing,
hus slowing economic g ow h.
Subsequen ly, globaliza ion has al e ed he ela ionship be ween
ex e nal deb and g ow h by in luencing eme ging economies h ough
capi al lows and inancial in eg a ions. Rele an heo ies illus a ing
how hese ac o s ede ine his in e ac ion include he ollowing:
The e ms o ade heo y, de eloped by P ebisch (1950), examines
how luc ua ions in he e ms o ade can impac eme ging economies.
A de e io a ion in he e ms o ade can educe expo e enues,
complica e ex e nal deb se icing, and hinde economic g ow h.
Theo y o dependence on commodi ies and g ow h, acco ding o
Sachs (1996), who analyzed how eme ging coun ies’ eliance on
commodi ies exposes hese economies o p ice ola ili y, which can
nega i ely impac hei abili y o epay ex e nal deb and hinde eco-
nomic g ow h. Globaliza ion exace ba es he ola ili y o commodi y
p ices, in luencing e ms o ade and expo e enues.
The heo y o economic openness and g ow h, K ugman (1989)
explo ed how economic openness acili a es ade and o eign in es -
men , he eby s imula ing g ow h. Howe e , excessi e openness can
inc ease ulne abili y o global economic shocks and luc ua ions in
capi al lows.
The heo y o eal g oss na ional income pe capi a examines how he
le el o eal income pe capi a in a coun y a ec s i s abili y o manage
ex e nal deb and suppo economic g ow h. Du ing pe iods o global-
iza ion, a high g oss na ional income can enhance a coun y’s abili y o
a ac o eign in es men and manage i s deb obliga ions (Ba o,
1991).
In summa y, heo ies show ha globalisa ion p o oundly in luences
he ela ionship be ween ex e nal deb and economic g ow h, wi h key
a iables such as access o inancial ma ke s, commodi y p ices, e ms o
ade, economic openness, and eal g oss na ional income pe capi a.
P uden managemen o hese a iables is c ucial o maximising he
bene i s o ex e nal deb while minimising he isks in a globalised
con ex .
Re iew o some models on he link be ween ex e nal deb and economic
g ow h in he con ex o globaliza ion
Globaliza ion signi ican ly in luences he ela ionship be ween
ex e nal deb and economic g ow h, wi h heo e ical models indica ing
bo h s imula ing e ec s h ough in es men and isks associa ed wi h
high le els o deb . This e iew examines empi ical models ha explo e
his ela ionship, ocusing on non-linea e ec s and a iables ela ed o
globaliza ion.
Gene al cha ac e is ics o he es ima ed models
Empi ical analyses gene ally ocus on he GDP g ow h a e as he
endogenous a iable. S udies o en use he a io o ex e nal deb o GDP
o expo s as he main explana o y a iable. C owding-ou e ec s a e
o en measu ed by deb se icing and include con ol a iables such as
human capi al, physical capi al and he mac oeconomic en i onmen .
The inclusion o globaliza ion a iables o e s an en iched pe spec i e
on his complex ela ionship. Gene ally, hese s udies use a single
equa ion o examine how ex e nal deb and i s a ious aspec s in luence
economic g ow h.
Re iew o empi ical s udies
Empi ical models and linea e ec s. Rocke bie (1994) examined a sample
o 13 La in Ame ican coun ies
4
o e he pe iod 1965–1990. He
concluded ha , o all coun ies, he e ec o deb on g ow h was pos-
i i e excep o Mexico. The sensi i i y o g ow h o o he de e minan s
a ies depending on he pe iod conside ed. Acco ding o his s udy, he
e ec o deb on g ow h depends bo h on he pe iod s udied
5
and he
speci ic coun y.
6
Ib ahim (2013) a emp ed o es ima e he impac o ex e nal public
deb on economic g ow h in ou Eas A ican coun ies. These a e
Kenya, Tanzania, Uganda and Rwanda be ween 1981 and 2014. The
da a we e analysed using ixed-e ec s and andom-e ec s model es i-
ma ion echniques. The esul s show ha public ex e nal deb has a
nega i e impac on economic g ow h in Eas A ican coun ies.
Chudik, Mohaddes, Pesa an, and Raissi (2017) conduc ed an analysis
using a la ge sample o 40 ad anced and eme ging economies be ween
1965 and 2010. Thei esul s indica e ha he nega i e e ec s o
ex e nal deb on economic g ow h become signi ican when deb ex-
ceeds 60 % o GDP. The s udy used a lexible non-linea model o ac-
coun o po en ial h eshold e ec s and con i med ha he nega i e
impac s on g ow h in ensi y as deb a ios ise abo e his h eshold.
Senadza, Fiagbe, and Qua ey (2018) examine he e ec o ex e nal
deb on economic g ow h in 39 Sub-Saha an A ican coun ies using
da a om 1990 o 2013. Employing he Gene alized Me hod o Momen s
(GMM), he au ho s ind ha ex e nal deb has a signi ican nega i e
impac on economic g ow h in he egion. This con i ms he classical
iew ha excessi e deb can hinde economic pe o mance by c ea ing
u u e iscal bu dens ha educe in es men and consump ion.
The au ho s o hese s udies use a linea app oach in hei analysis o
he impac o ex e nal deb on economic g ow h. Howe e , adi ional
heo ies gene ally sugges ha he impac o ex e nal deb on economic
g ow h emains posi i e up o a ce ain h eshold, beyond which he
e ec becomes nega i e. This highligh s he need o apply a non-linea
app oach.
Non-linea models and h eshold e ec s. Non-linea s udies ha e explo ed
he ela ionship be ween ex e nal deb and economic g ow h, sugges ing
ha he impac o deb can change acco ding o i s le el.
Pa illo, Poi son, and Ricci (2002) s udied 93 de eloping coun ies
o e he pe iod 1969–1998 using h ee-yea ly panel da a. They ound
ha ex e nal deb exhibi s an in e ed U-shaped ela ionship wi h eco-
nomic g ow h, con i ming he La e cu e, whe e a high le el o deb is
4
Use o he ime p ocedu e o each coun y.
5
Be o e and a e a poli ical change.
6
The empi ical esul s e eal a posi i e impac o ex e nal deb on g ow h o
all coun ies excep Mexico, which seems o ha e su e ed om deb o e hang
be o e he c isis.
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
3
de imen al o g ow h. Thei s udy also e eals ha he school en ol-
men a e and he in es men a e a ou g ow h, while ex e nal deb
se icing and demog aphic g ow h ha e a nega i e e ec .
Clemen s, Bha acha ya, and Nguyen (2003) analyzed 55 low-
income coun ies om 1970 o 1999 and ound an in e ed U-shaped
ela ionship be ween ex e nal deb and economic g ow h. They
con i med ha beyond a c i ical h eshold o 30–37 % o GDP o
115–120 % o expo s, ex e nal deb begins o ha m g ow h. Thei s udy
highligh s he non-linea i y o his ela ionship, aking in o accoun
essen ial con ol a iables.
Rubio, Ojeda Joya, and Mon es U ibe (2003) s udied he non-linea
e ec o o eign deb on economic g ow h in Colombia, using a iables
such as he s ock o o eign deb , i s squa e, he a e o p i a e in es -
men , and deb se icing. The s udy iden i ies a c i ical h eshold o
27.2 % o GDP, beyond which an inc ease in ex e nal deb by 1 pe -
cen age poin o GDP educes he economic g ow h a e by 0.18 pe -
cen age poin s.
Ege (2015), using a h eshold eg ession o OECD coun ies om
1960 o 2012, iden i ied a deb h eshold o a ound 90 % o GDP, abo e
which deb has a nega i e impac on g ow h. Simila ly, Woo and Kuma
(2015) con i med o 34 ad anced economies ha deb abo e 85 % o
GDP leads o a signi ican decele a ion in g ow h, highligh ing he non-
linea na u e o his ela ionship.
Al hough hese s udies ha e iden i ied gene al c i ical h esholds o
ex e nal deb , he in eg a ion o globaliza ion a iables is essen ial o
unde s anding local speci ici ies and he di e en ia ed impac s o deb
on economic g ow h.
Non-linea models and globaliza ion. Pa illo e al. (2002) ha e shown ha
coun ies wi h a high pe capi a income can be e manage high le els o
ex e nal deb wi hou his se iously ha ming g ow h. This a iable ac s
as a mode a o , allowing ad anced economies o abso b deb shocks and
in es e icien ly in p oduc i e p ojec s, he eby educing he nega i e
impac s o indeb edness.
Rubio e al. (2003) emphasizes ha un a o able e ms o ade
exace ba e he nega i e e ec s o deb on g ow h. A de e io a ion in
e ms o ade, cha ac e ized by declining expo p ices ela i e o
impo p ices, inc eases he deb bu den, he eby educing in es men
and hinde ing economic g ow h.
Woo and Kuma (2015) ound ha mo e open economies a e mo e
ulne able o he nega i e e ec s o indeb edness when deb le els
exceed a c i ical h eshold. While economic openness can o e g ow h
oppo uni ies, inc eased exposu e o ex e nal shocks can exace ba e he
de imen al e ec s o ex e nal deb on economic g ow h.
Inco po a ing hese globaliza ion a iables makes i possible o
e ine he c i ical h esholds and non-linea e ec s o ex e nal deb on
economic g ow h, o e ing an en iched pe spec i e on he speci ic con-
di ions o each coun y in a globalised con ex .
Hypo heses de elopmen
Ou e iew o he heo e ical li e a u e has allowed us o o mula e
he ollowing hypo heses conce ning he ela ionship be ween ex e nal
deb and economic g ow h in eme ging coun ies, in a con ex o
globaliza ion:
Non-linea ela ionship
H1a: Ex e nal deb has a posi i e e ec on economic g ow h a low
le els o deb .
H1b: Beyond a c i ical h eshold, ex e nal deb hampe s economic
g ow h.
C owding-ou e ec
H2: High ex e nal deb se icing educes economic g ow h due o he
c owding-ou e ec .
Impac o globaliza ion
H3a: A highe eal g oss na ional income pe capi a imp o es
eme ging coun ies’ abili y o manage hei ex e nal deb and suppo s
economic g ow h.
H3b: Ad e se e ms o ade and inc eased economic openness aise
he cos s o ex e nal deb and hinde economic g ow h.
H3c: Commodi y p ice ola ili y nega i ely a ec s he ela ionship
be ween ex e nal deb and economic g ow h due o he ins abili y o
expo e enues.
Ou hypo heses will be es ed using econome ic app oaches in
quan i a i e s udies.
In he nex s age, we will analyze he his o ical e olu ion o ex e nal
indeb edness in he eme ging coun ies in ou sample and i s in e ac ion
wi h globaliza ion. An econome ic s udy using a panel model will
examine how globaliza ion in luences he ela ionship be ween ex e nal
indeb edness and economic g ow h, by inco po a ing speci ic a iables
linked o his phenomenon.
Public ex e nal deb and economic g ow h: a desc ip i e analysis
E olu ion o ex e nal deb in eme ging coun ies
The analysis o he e olu ion o public ex e nal deb since he 2000s
highligh s how paymen de aul c ises, such as ha o Mexico, ha e
e ol ed in o s uc u al challenges hinde ing economic g ow h. This
dynamic has been in ensi ied by globaliza ion, which has exposed
eme ging coun ies o inc eased ulne abili ies due o hei deepe
in eg a ion in o global inancial ma ke s and a ia ions in in e na ional
economic condi ions. Consequen ly, global luc ua ions ha e had a
di ec impac on deb managemen and, by ex ension, on he economic
g ow h o eme ging coun ies (Fig. 1).
The o al ex e nal deb o eme ging coun ies inc eased by 10.1
pe cen age poin s, ising om $339.8 billion in 2019 o $374.3 billion,
ep esen ing a signi ican inc ease as a pe cen age o GDP (34.9 %
compa ed o 29.5 % he p e ious yea ). This ise is la gely a ibu ed o
he ad e se e ec s o he COVID-19 pandemic, which exace ba ed he
economic ulne abili ies o eme ging coun ies amid heigh ened glob-
aliza ion (Fig. 2). The deepe in eg a ion in o he global economy has
in ensi ied he nega i e impac s, highligh ing how global shocks can
ampli y deb managemen challenges and in luence economic g ow h
p ospec s.
In his s ep, we aim o ace he e ec o changes in ex e nal deb
7
o
en eme ging coun ies in ou sample on hei economic g ow h a es.
8
The wo g aphs enable us o conduc a compa a i e s udy o e he wo
decades.
We can obse e he nega i e impac o ex e nal deb on economic
g ow h, whe e a di ec ela ionship be ween he educ ion in deb s ock
and imp o ed economic g ow h a es is e iden . The dec ease in
ex e nal deb has led, o he majo i y o he s udied coun ies (Fig. 4), o
inc eased economic g ow h, anging be ween 3.5 % and 6 %. This dy-
namic highligh how globaliza ion, by in luencing global inancial
condi ions and capi al lows can modula e he e ec o ex e nal deb on
Fig. 1. S ock and se ice o he ex e nal deb o he eme ging coun ies in ou
s udy o he yea 2022. .
Sou ce: Compiled by he au ho s om Wo ld Bank da a
7
Exp essed as an a e age.
8
Idem.
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
4
he economic g ow h o eme ging coun ies.
Fo example, in he Philippines, a 6 % educ ion in he s ock o
ex e nal deb led o an inc ease in he economic g ow h a e om 1.6 %
o 4.56 % be ween 2000 and 2010 (Fig. 4). Simila ly, in Tunisia, a 1.5 %
educ ion in ex e nal deb inc eased he economic g ow h a e om 3 %
o 4.5 % o e he pe iod 2011 o 2022 (Figs. 3 and 4). These obse a-
ions illus a e how a ia ions in he le el o ex e nal deb can posi i ely
in luence economic g ow h, pa ly due o he e ec s o globaliza ion
p ocesses on economic condi ions in eme ging coun ies.
Me hodology
Ou empi ical s udy complemen s he heo e ical aspec o his
esea ch wo k by using a quan i a i e me hod based on econome ic
modelling. The main objec i e is o demons a e he impac o ex e nal
deb on g ow h in eme ging coun ies, while si ua ing his ela ionship
in he con ex o globaliza ion.
The use o a quan i a i e me hodology is jus i ied by i s nume ous
ad an ages, as highligh ed by Deslau ie s (1991): i allows o he p o-
ision o quan i ied esul s ha can be subjec ed o s a is ical analysis,
akes in o accoun di e ences be ween g oups, and eaches a la ge
numbe o esponden s in a sho ime. In he con ex o ou s udy, his
app oach is pa icula ly ele an o examining he di e en ia ed
impac o ex e nal deb based on global economic condi ions.
In s udying he impac o ex e nal deb on economic g ow h in
eme ging coun ies, i has become e iden ha he ela ionship be ween
hese wo a iables is o en nonlinea . Indeed, he e ec o deb u ns
nega i e beyond a ce ain h eshold, highligh ing he limi a ions o a
simple linea ep esen a ion. The e o e, a ho ough econome ic anal-
ysis is necessa y o accoun o no only in e nal ac o s bu also
globaliza ion- ela ed ac o s, such as eal g oss na ional income pe
capi a, e ms o ade, economic openness, and commodi y p ice ola-
ili y. This app oach will allow us o iden i y he complex and nonlinea
ela ionship be ween ex e nal deb and economic g ow h, hus
p o iding a mo e p ecise esponse o ou esea ch ques ion.
Da a om he s udy
By applying he same me hodology as he empi ical s udies al eady
p esen ed in he li e a u e e iew, bu wi h an e o o adap i o he
da a a ailable o us. To do his, we use Wo ld Bank da a o he pe iod
om 1990 o 2022, o a panel o 10 coun ies (Chile, Egyp , Indonesia,
Malaysia, Mexico, Mo occo, Philippines, Thailand, Tunisia, and
Tu key).
The sample o coun ies conside ed has been selec ed o ou speci ic
needs and di e s om he samples conside ed in he a ious empi ical
s udies p e iously men ioned. The c i e ia o selec ing he coun ies
based on hei key ole in he p ocesses o globaliza ion a e as ollows:
They a e commodi y-expo ing coun ies wi h ela i ely simila
le els o de elopmen and g ow h a es.
They a e coun ies ha ha e expe ienced a deb c isis du ing he
pe iod om 1990 o 2022.
Rega ding he quali y o he da a, we ha e ensu ed he use o
con inuous and ha monized ime se ies o gua an ee compa abili y be-
ween coun ies and pe iods. Ne e heless, i is impo an o no e ha
issues such as e isions o his o ical da a, epo ing e o s, and
me hodological changes can in oduce biases in o he analysis. Special
a en ion was gi en o e i ying he in e nal consis ency o he da a by
excluding coun ies ha expe ienced signi ican le els o de elopmen
du ing he s udy pe iod. Addi ionally, we employed impu a ion me hods
o handle missing alues. This app oach ensu es a obus and ele an
analysis in he con ex o cu en global dynamics.
Resea ch model
In line wi h p e ious de elopmen s in he heo e ical and empi ical
li e a u e, ou esea ch model analyses he ela ionship be ween
ex e nal deb and economic g ow h in eme ging coun ies, aking in o
accoun he in luence o globaliza ion a iables. Economic g ow h is
measu ed by he g ow h a e o eal g oss domes ic p oduc (GDP), in
acco dance wi h he de ini ion p oposed by (Pe oux, 1990), who de-
sc ibes economic g ow h as he sus ained inc ease, o e one o mo e
long pe iods, o a dimensional indica o such as GDP in eal e ms.
In ou model, we in eg a e no only classic a iables such as he
ex e nal deb s ock and deb se ice bu also a iables ep esen ing he
e ec s o globaliza ion, such as eal g oss na ional income pe capi a,
e ms o ade, economic openness, and commodi y p ice ola ili y. This
app oach allows us o examine no only he di ec impac o ex e nal
deb on economic g ow h bu also how his impac is modi ied by global
ma ke o ces.
In modeling his ela ionship, we adop a panel da a econome ic
app oach, which allows o he analysis o bo h empo al and c oss-
sec ional a ia ions, he eby p o iding a mo e comp ehensi e and
nuanced iew o he unde lying dynamics. Ou goal is o iden i y c i ical
h esholds and non-linea e ec s ha could explain he di e gences in
g ow h ajec o ies among eme ging coun ies based on hei in eg a-
ion in o he global economy.
Choice o a iables
The se o explana o y a iables o he economic g ow h a e is
p esen ed in Table 1 abo e.
i: 1, 2, 3,… 10.
: 1990, …2022.
β: he cons an e m.
ß
1
ß
2
ß
3
….… ß
10
: The ec o o he coe icien s.
U
i
=u
i
+
i
: The e o e m in he model.
u
i
: Deno es he unobse able indi idual speci ic e ec .
i
: Re lec s he in e ac ion o unobse ed sou ces o in e - and in a-
indi idual a ia ion.
P esen a ion o he panel model
Panel da a, o c oss-sec ional ime se ies da a, epo he alues o
he conside ed a iables o a se , o panel, o indi iduals (N) o e a
sequence o pe iods (T). The da a is e e ed o as a balanced panel when
all indi iduals ha e he same numbe o obse a ions, and as an un-
balanced panel when some indi iduals ha e missing obse a ions.
In addi ion, he a gumen s in a o o using panel da a me hodology
o s udy he impac o ex e nal deb on economic g ow h in eme ging
coun ies, pa icula ly in he con ex o globaliza ion, a e as ollows:
Con olling o indi idual e ec s: Panel da a con ols o coun y-
speci ic indi idual e ec s, which helps isola e he ne impac o
ex e nal indeb edness on economic g ow h. This is especially ele an in
a globalized wo ld whe e coun ies a e exposed o di e en le els o
in eg a ion in o he global economy, leading o unique ex e nal in-
luences ha can be accoun ed o by his me hodology.
Managemen o empo al dynamics: This me hodology akes in o
accoun he empo al dynamics o he da a, which is essen ial o
cap u ing he long- e m e ec s o deb on g ow h.
Inc ease in s a is ical powe : By using da a om mul iple coun ies
o e se e al pe iods, he panel da a me hodology enhances he s a is-
ical powe o he analysis. This allows o he de ec ion o mo e p ecise
and obus e ec s, p o iding a be e unde s anding o complex
Fig. 2. E olu ion o he o al ou s anding deb o eme ging coun ies. .
Sou ce: Compiled au ho s om Wo ld Bank da a
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
5
dynamics, pa icula ly in he con ex o globaliza ion whe e di e se
economic in e ac ions play a c i ical ole.
Reduc ion o selec ion bias: Compa ed o o he me hods, such as
simple c oss-sec ional eg essions, panel da a educes he isk o selec-
ion bias by including g ea e a iabili y and accoun ing o bo h em-
po al and coun y-speci ic cha ac e is ics.
Flexibili y in model speci ica ion: Panel da a p o ides lexibili y in
model speci ica ion, allowing o he inclusion o bo h ime-speci ic and
coun y-speci ic a iables, as well as handling issues ela ed o missing
da a.
In summa y, panel da a me hodology is well-sui ed o examining
he complex impac o ex e nal deb on economic g ow h in eme ging
coun ies, o e ing bo h s a is ical obus ness and he abili y o con ol
o a ious ele an ac o s while inco po a ing he e ec s o
globaliza ion.
Me hods o es ima ing panel da a
In he case o panel da a, indi idual he e ogenei y
9
is es ima ed
using a ixed o andom e ec s model.
The indi idual ixed e ec s model
I is a model whose indi idual esiduals ha e a cons an non- andom
cha ac e . This means ha he impac o he obse ed explana o y
a iables on economic g ow h is he same o all coun ies, wha e e he
yea s udied. I is es ima ed by O dina y Leas Squa es (OLS) on wi hin,
o ixed e ec s es ima o o LSDV (Leas Squa e Dummy Va iable)
es ima o . The e m wi hin is explained by he ac ha his es ima o
akes in o accoun he in a-g oup a iance o he endogenous a iable.
The andom indi idual e ec s model
I is a model whose indi idual esiduals, which ep esen speci ici ies
o economic g ow h, di e om one indi idual o ano he . The GCM
(Gene alized Leas Squa es) is used o he es ima ion o he andom
e ec s model.
The Hausman es
10
allows us o choose be ween he wo models. I
gi es us he igh o assume ha he heo e ical model s udied is
pe ec ly iden ical o all coun ies o on he con a y i he e a e
speci ici ies o each coun y in ou sample.
In ou s udy, we chose a ixed-e ec s linea modeling app oach. This
me hod p o ides es ima es ha accoun o coun y-speci ic e ec s,
allowing o a mo e p ecise analysis o he impac o ex e nal deb on
economic g ow h while inco po a ing he unique cha ac e is ics o each
coun y in he sample. Addi ionally, his app oach akes in o conside -
a ion he e ec s o globaliza ion, enabling a nuanced unde s anding o
how global economic in eg a ion in luences he ela ionship be ween
ex e nal deb and economic g ow h.
Resul s and discussions
Resul s o he econome ic s udy
Be o e p oceeding wi h he es ima ion, we mus i s examine he
collinea i y among he exogenous a iables h ough he co ela ion
ma ix
11
o a oid a ec ing he accu acy and ele ance o he model.
Howe e , i is only h ough he panel model ha we can deduce he
in e -indi idual and in a-indi idual a iabili ies o ou sample. Table 2
below p esen s he esul s o he model es ima ion:
Discussion o esul s
The explana o y powe o he model is s ong, wi h he R2 indica ing
ha app oxima ely 65 % o he a iance in g ow h is explained by he
explana o y a iables. The Fishe es is signi ican (p- alue: 0.0000),
sugges ing ha he a iables a e globally ele an . Finally, acco ding o
he S uden ’s - es , he a iables a e globally signi ican a he 5 % le el,
excep o demog aphic g ow h and deb se ice.
The impac o a iables cha ac e izing ex e nal deb on economic g ow h
The empi ical esul s o ou s udy e eal a non-linea ela ionship
be ween he ex e nal deb s ock and economic g ow h, hus con i ming
ou ini ial hypo heses wi hin he con ex o globaliza ion. Speci ically,
he posi i e and signi ican e ec o he ex e nal deb s ock ( =3.05) a
Fig. 3. Compa a i e s udy o he le el o indeb edness o eme ging coun ies (be ween 2000 and 2010). .
Sou ce: Compiled by he au ho s om Wo ld Bank da a
Fig. 4. Compa a i e s udy o he le el o indeb edness o eme ging coun ies (be ween 2011 and 2022). .
Sou ce: Compiled by he au ho s om Wo ld Bank da a
9
Appendix 1: The use o a panel econome ic es ima e is wa ned by he chi-
squa e s a is ic. The la e is less han 5%. The e o e, we mus hen choose
be ween a ixed o andom indi idual e ec s es ima e.
10
Appendix 2: The ixed-e ec s model is hen mo e indica i e o he s uc u e
o ou sample da a, as i is mo e app op ia e han he andom-e ec s model
since he P- alue is below he 5% h eshold.
11
The esul s o he es show ha he explana o y a iables a e unco ela ed
wi h e y low coe icien s (no exceeding 0.43). The esul s o he es show ha
he explana o y a iables a e no co ela ed wi h e y low coe icien s (no
exceeding 0.43). This allows us o conclude ha he e is no gende p oblem ha
could a ec he obus ness o he model (see Appendix 3).
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
6
low le els o deb alida es Hypo hesis 1a, which posi s ha ex e nal
deb can s imula e economic g ow h when used o ill gaps in na ional
sa ings and inance necessa y in es men s o economic de elopmen .
This inding aligns wi h he wo ks o Clemen s e al. (2003) and Pa illo
e al. (2002), which suppo he no ion ha , in he con ex o inc eased
in eg a ion in o in e na ional inancial ma ke s, deb can os e g ow h
by enabling eme ging coun ies o access he esou ces needed o hei
de elopmen .
Howe e , ou analysis shows ha as he le el o deb inc eases, i s
impac on g ow h becomes nega i e, as indica ed by he signi ican and
nega i e coe icien o he squa ed e m o he deb s ock (hypo hesis 1b)
acco ding o ou esul s. This con i ms he o e -indeb edness hypo he-
sis, whe e deb exceeds a c i ical h eshold, making i s se icing un-
sus ainable and he eby hinde ing economic g ow h. This phenomenon,
o en desc ibed as he ’ i ual deb bu den,’ is ampli ied in he con ex o
globaliza ion, whe e luc ua ions in global in e es a es and in e na-
ional inancial c ises can exace ba e he nega i e e ec s o excessi e
deb . These esul s con i m he heo y o excessi e deb and g ow h in a
globalized con ex , as de eloped by K ugman (1988a,b) and Cohen
(1993). Thus, he ini ial bene icial e ec s o globaliza ion, which enable
eme ging coun ies o mobilize ex e nal esou ces, can u n in o disad-
an ages i deb is no well managed.
As ega ds deb se icing, al hough i s impac on economic g ow h is
nega i e, i is no s a is ically signi ican in ou model, which co obo-
a es hypo hesis 2. This esul is in line wi h he p ima y ex e nal deb
bu den heo y, which sugges s ha deb se icing does no di ec ly
a ec g ow h, bu a he pu s p essu e on he liquidi y a ailable o
in es men , he eby educing he in es men a e (c owding ou e ec ).
In he con ex o globaliza ion, whe e he in eg a ion o inancial ma -
ke s accen ua es economic in e dependence, deb se icing can limi he
in es men capaci y o eme ging coun ies, making hem mo e ulne -
able o global economic shocks.
In summa y, ou esul s indica e ha globaliza ion plays a dual ole:
i p o ides eme ging coun ies wi h oppo uni ies o access in e na ional
inancing while exposing hem o inc eased isks associa ed wi h
excessi e deb . The e o e, p uden managemen o ex e nal deb is
c ucial o maximize he bene i s o globaliza ion while minimizing i s
po en ial isks.
O he ac o s explaining economic g ow h
The e ec o opening
The esul s indica e a posi i e and signi ican e ec o ade openness
Table 1
P esen a ion o he explana o y a iables used o he economic g ow h a e.
Exogenous a iables used The signs
expec ed
Bibliog aphic
e e ences
The a iables
o
ex e nal
deb
ex e nal
Deb _se : deb se ice/
expo s o goods and
se ices
Nega i e •Clemen s,
Bha acha ya, and
Nguyen (2003)
•Pa illo e al. (2002)
•Se ieux and
Yiagadeesen
(2001)
•S ephens (2001)
Sde _gdp: he loga i hm
o he s ock o ex e nal
deb /GDP
Posi i e •Clemen s e al.
(2003)
•Deshpande (1997)
•Pa illo e al. (2002)
•Rocke bie (1994)
(Sde _gdp)^
2
: ( he
loga i hm o he s ock o
ex e nal deb /GDP)
squa ed
Nega i e •Clemen s e al.
(2003)Pa illo e al.
(2002)
The a iable
income
GNI: he loga i hm o eal
g oss na ional income pe
capi a g oss na ional
income
Nega i e •Ba o (1990)
•Clemen s e al.
(2003)
•Pa illo e al. (2002)
The a iables
o human
and
physical
capi al
Demo_g o: he a e o
g ow h a e o he
popula ion
Posi i e •Clemen s e al.
(2003)
•Pa illo e al. (2002)
Insc_sec
1
: he g oss
en olmen a e
seconda y school
en ollmen , i is a
p oxy a p oxy o human
de elopmen . I is
measu ed by
he a io o seconda y
school
en olled in seconda y
school o he
popula ion o young
people
you h aged 12 o 18.
Posi i e •Ba o (1990)
•Clemen s e al.
(2003)
•Pa illo e al. (2002)
In _Gdp: g oss ixed
capi al o ma ion capi al
o ma ion/GDP
Posi i e •Clemen s e al.
(2003)
•Pa illo e al. (2002)
The a iables
o o eign
ade
Te m_ ad: The a e o
change
in he e ms o ade. The
e ms
o ade a e measu ed by
(index o expo alue/
index o impo alue)
*100
Posi i e •Clemen s e al.
(2003)
•Pa illo e al. (2002)
Open: (impo s o goods
and se ices +expo s o
expo s o goods and
se ices) *100
Posi i e •Clemen s e al.
(2003)
•Pa illo e al. (2002)
•Sachs and Wa ne
(1995)
Raw ma e ials
p ices
Com P ol: The ola ili y
o commodi y p ices
Nega i e •Van de Ploeg and
Poelhekke (2009)
•Sachs and Wa ne
(1995)
Sou ce: Compiled by he au ho s.
1
This is he only a iable ha con ained missing alues. In o de no o
elimina e his a iable, we chose a me hod o impu a ion by he a e age, we
eplace he missing alue by he a e age o neighbou ing alues.
Table 2
Resul s o he es ima ion o he economic g ow h a e analysis model.
Va iables Fixed e ec s model
Coe . T-S uden
LOG(GNI) −7.856556 −7.652142***
TERM_TRAD 0.048756 1.597126*
DEMO_GRO 0.256520 0.231547
INSC_SEC 0.132312 3.822334**
INV_GDP 0.298687 2.881245**
OPEN 0.048623 3.064526**
DEBT_SERV −0.045267 −1.186609
LOG(SDETT_GDP) 12.65712 3.059188**
LOG(SDETT_GDP)^2 −3.674137 −3.497379**
COM_PRVOL −0.065322 −2.436869*
Cons 6.593452 0.374694
R
2
0.658567
Fishe 7.368125
P ob >chi2 =0.0000
Sou ce: Compiled by he au ho s.
***; **; *; signi ican a he 1 %, 5 % and 10 % le el espec i ely.
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
7
on economic g ow h, wi h a signi ican coe icien a 10 %, which e-
u es hypo hesis 3b. This inding shows ha , in he con ex o ou sample
o eme ging coun ies, global economic in eg a ion has a he con ib-
u ed o s imula ing g ow h h ough expo s, pa icula ly manu ac u ed
goods. This esul con adic s conce ns ha inc eased openness migh
expose hese economies o nega i e ex e nal shocks, sugges ing ins ead
ha access o in e na ional ma ke s and global echnologies has
enhanced he p oduc i e capaci ies and economic esilience o hese
coun ies.
Wi h ega d o globaliza ion, ou esea ch shows ha economic
openness p omo es he sp ead o inno a ion and access o o eign di ec
in es men , which suppo s economic g ow h in eme ging economies.
Howe e , hese bene icial e ec s also depend on hese coun ies’ abili y
o s eng hen hei posi ion on in e na ional ma ke s. In his con ex ,
globaliza ion appea s o be a ac o which, i well managed, can mi iga e
he po en ial nega i e e ec s o ex e nal deb by s imula ing economic
g ow h h ough inc eased ade and in es men lows.
These esul s con as wi h some elemen s o he exis ing li e a u e.
Fo example, Rubio e al. (2003) highligh s ha ad e se e ms o ade
exace ba e he nega i e e ec s o deb on economic g ow h by
inc easing he deb bu den and educing in es men . Simila ly, Woo and
Kuma (2015) indica e ha mo e open economies a e mo e ulne able
o he nega i e e ec s o deb , especially when deb le els exceed a
c i ical h eshold. Howe e , ou esea ch shows ha economic open-
ness, wi hin he con ex o ou sample, played a mode a ing ole, mi i-
ga ing he po en ial ad e se e ec s o ex e nal deb . This sugges s ha ,
con a y o he conclusions o some s udies, e ec i e managemen o
economic in eg a ion can po en ially ans o m he challenges posed by
globaliza ion in o oppo uni ies o suppo g ow h.
The income a iable
The esul s o ou analysis show ha he a iable o eal g oss na-
ional income pe capi a has a signi ican bu nega i e e ec on eco-
nomic g ow h. These indings e eal a pa adox ega ding eal g oss
na ional income pe capi a as a a iable o globaliza ion. Con a y o he
li e a u e, such as Pa illo e al. (2002), which asse s ha high-income
coun ies manage hei ex e nal deb be e , ou esul s indica e a
nega i e e ec o his a iable on g ow h. This sugges s ha , in ou
sample o eme ging coun ies, a high eal g oss na ional income pe
capi a did no accele a e g ow h, likely due o challenges ela ed o
globaliza ion, such as dependency on in e na ional inancial lows and
ulne abili y o ex e nal shocks. These esul s e u e Hypo hesis 3a,
indica ing ha globaliza ion may exace ba e s uc u al inequali ies and
limi he g ow h bene i s o ou sample o eme ging coun ies.
In his espec , his analysis highligh s how globaliza ion, ia a i-
ables such as g oss na ional income pe capi a, in luences he ela ion-
ship be ween ex e nal deb and economic g ow h. I also emphasizes
ha he abili y o eme ging coun ies o manage hei deb e ec i ely in
a globalised en i onmen is c ucial o mi iga e he po en ial nega i e
impac s on g ow h. I also highligh s ha he abili y o eme ging
coun ies o e ec i ely manage hei deb in a globalised en i onmen is
c ucial o mi iga ing po en ial nega i e impac s on g ow h.
The a iable o aw ma e ial p ices
The esul s ob ained indica e ha he ola ili y o commodi y p ices
has a signi ican nega i e impac on economic g ow h, highligh ing he
ulne abili y o eme ging coun ies ha a e hea ily dependen on
commodi y expo s. This inding is consis en wi h he heo y o com-
modi y dependence and g ow h, as de eloped by (Sachs and Wa ne ,
1995). This can be explained by he ac ha he commodi y dependence
o he eme ging coun ies in ou sample exposes hei economies o p ice
ola ili y, which no only a ec s hei abili y o epay ex e nal deb , bu
also slows economic g ow h, which con i ms hypo hesis 3c. In ac , in a
con ex o inc eased globaliza ion, eme ging economies see hei abili y
o manage hei ex e nal deb e ec i ely pu o he es by ola ile
expo e enues, which can ha e epe cussions on hei o e all
economic s abili y. Fluc ua ing commodi y p ices a e he e o e p o ing
o be a key a iable linked o globaliza ion, p o oundly in luencing he
economic dynamics o eme ging coun ies.
The e ec o human and physical capi al a iables
The esul demons a es ha al hough di e ences in popula ion
g ow h a es a e signi ican , hey a e no su icien o explain he dis-
pa i ies in economic g ow h be ween coun ies. This highligh s ha
unskilled labo , while necessa y, is no su icien o d i e g ow h. In
con as , in oducing he seconda y school en ollmen a e as a p oxy
a iable o human capi al e eals a posi i e and signi ican e ec on
economic g ow h, consis en wi h he wo k o Ba o (2001) and Lucas,
1998. These esul s indica e ha imp o ing human capi al is c ucial o
enhancing p oduc i i y and os e ing sus ained g ow h.
In he con ex o globaliza ion, hese esul s a e e en mo e ele an .
Globaliza ion in ensi ies he in eg a ion o he eme ging economies in
ou sample in o in e na ional ma ke s, making human capi al and in-
es men s e en mo e c ucial o main aining economic compe i i eness.
High-quali y human capi al, ep esen ed by a high seconda y school
en ollmen a e, enables coun ies o be e in eg a e in o he global
economy, s imula e inno a ion, and s eng hen hei esilience agains
ex e nal shocks, he eby maximizing he bene i s o hei pa icipa ion
in global ma ke s.
The a e o in es men has a posi i e impac on he a e o economic
g ow h, wi h a posi i e and signi ican coe icien a 5 % ( =2.88),
unde lining he impo ance o in es men e o s o de elopmen .
Globaliza ion ampli ies his e ec by inc easing ade and capi al lows,
making in es men essen ial o emain compe i i e. Thus, a high a e o
in es men can lead o an inc ease in p oduc ion and income, s imu-
la ing agg ega e demand in line wi h he Keynesian mul iplie . Fo he
eme ging coun ies in ou sample, p ope managemen o ex e nal deb
coupled wi h inc eased in es men is key o success ul in eg a ion in o
global ma ke s. This ela ionship is co obo a ed by he wo k o Sa -
id`
es, Ojo and Oshekoya (1995).
Conclusion
This s udy analyses he impac o ex e nal deb on economic g ow h
in he eme ging coun ies in ou sample, highligh ing he e ec s o
globaliza ion. Panel da a om 1990 o 2022 acco ding o ou es ima es
e eal a non-linea ela ionship, con i ming a La e cu e: while a
mode a e le el o deb s imula es g ow h, excess deb slows g ow h,
ampli ied by luc ua ions in in e na ional in e es a es and global eco-
nomic c ises. The esul s show ha , al hough ex e nal deb may ini ially
a o economic g ow h, excessi e deb becomes a bu den, pa icula ly
in a ola ile global en i onmen . Globaliza ion ampli ies hese e ec s by
exposing eme ging coun ies o luc ua ions in inancial ma ke s and
in e na ional economic c ises.
This esea ch adds alue o he exis ing li e a u e by inco po a ing
globaliza ion a iables such as aw ma e ial p ice ola ili y and ade
openness in o he analysis o he ela ionship be ween ex e nal deb and
economic g ow h in eme ging coun ies. Unlike p e ious s udies ha
o en ocused on linea models o analyses limi ed o in e nal a iables,
his esea ch e eals how globaliza ion al e s he dynamics be ween
ex e nal deb and g ow h. By demons a ing h ough ou es ima es ha
aw ma e ial p ice ola ili y exace ba es economic di icul ies and ha
ade openness can s imula e g ow h while exposing eme ging econo-
mies o global isks, his s udy p o ides a mo e nuanced and comp e-
hensi e unde s anding o con empo a y challenges. Addi ionally, he
emphasis on human capi al and physical capi al en iches he deba e by
highligh ing hei c ucial oles in maximizing he bene i s o globaliza-
ion and p omo ing sus ainable economic g ow h.
We ecommend ha eme ging coun ies de elop balanced deb
managemen policies ha p omo e in es men s in human and physical
capi al while minimizing he isks associa ed wi h excessi e deb . A
cau ious and s a egic app oach is essen ial o na iga e a globalized
O. Elkhal i e al.
Resea ch in Globaliza ion 9 (2024) 100248
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