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Journal of Economic Integration 2019 December;34(4) :725-745.
External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries


1University of Jendouba, Tunisia, V.P.N.C lab
2University of Jendouba, Université de Tunis, GEF-2A lab, Tunisia
3CERIIM, La Rochelle, France
Corresponding Author: HAKIMI Abdelaziz ,Tel: 00 216 97 089 263, Email:
Copyright ©2019 Journal of Economic Integration
This study analyzes whether external debt is a driving factor for investment and economic growth in low-income countries. Using data over the period 2000~2017, we performed an analysis using the 23 countries in the sample and a split-sample analysis wherein we separated less indebted countries (12) from more indebted countries (11). Empirical results of the seemingly unrelated regressions model indicate that external debt significantly decreases investment and economic growth for both the total sample and the sub-samples. In addition, we found that trade openness is positively and significantly related to the level of growth per capita. This positive association is confirmed for both the total sample and the split sample. Findings also indicate that the level of growth exerts a positive and significant effect on investment for the total sample and for less indebted countries.

JEL Classification
F34: International Lending and Debt Problems
O40: General
Keywords: External debt | Investment | Economic growth | Low-income countries | SUR Model
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