Do Debt Boosts Economic Growth? A Study of the South Asian Countries

Abstract

This article determines the long run and short term relationship between GDP growth rate and three selected variables of debt in South Asian economy for the period of last 20 years i-e from 1994-2014. We inspected this relationship using graphical trend analysis, unit root test (ADF) and correlogram test. We implemented multiple regression analysis technique to determine the causality between the variables. Our findings depicts that in short run and long run significant positive linear relationship exists between external debt and GDP growth rate for South Asian economy. Surprisingly, no impact of central government debt and household debt on GDP growth rate was found. Our findings prove that external debt is a blessing for South Asian countries.

Keywords: GDP, External debt, Central Government Debt, Household Debt, Multiple Regression Model