Kurniasih, Erni Panca (2021) The effect of foreign debt on the economic growth. Jurnal Ekonomi Malaysia, 55 (3). pp. 125-136. ISSN 0127-1962
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Official URL: https://www.ukm.my/jem/issue/v55i3/
Abstract
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.
Item Type: | Article |
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Keywords: | Foreign debt; Foreign direct investment; Economic growth; Indonesia, Error correction model |
Journal: | Jurnal Ekonomi Malaysia |
ID Code: | 18803 |
Deposited By: | ms aida - |
Deposited On: | 20 Jun 2022 06:35 |
Last Modified: | 23 Jun 2022 08:46 |
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