The Impact of External Debt on Economic Growth: The Case of Algeria: An ARDL Bound Testing Approach 1990–2021

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Pages: 63-72
DOI: https://doi.org/10.54664/FDGQ3698

Abstract:

Sustainable economic growth is an important macroeconomic objective for emerging states. However, if the country does not have sufficient capital to support GDP growth, and even if it lacks capital, the government can borrow some capital in the form of external debt to support GDP growth. The purpose of this study is to consider the link between economic growth and external debt in Algeria’s economy. Moreover, it examines the long- and short-term implications of several factors, such as the share of external debt to GDP, the debt-to-GDP stock ratio, and the national expenditure-to-GDP ratio, the exchange rate and commercial openness. The ARDL Bound Test was used to measure the impact of external debt on economic growth. According to the study, there is a long-term negative relationship between external debt and economic growth in Algeria, which shows that the external debt has adverse effects on economic growth.

Keywords:

external debt; economic growth; ARDL; Algeria.

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