http://dx.doi.org/10.31703/ger.2023(VIII-II).28
10.31703/ger.2023(VIII-II).28
Published : Jun 2023
Dynamics of Use of IMF Debt: Evidence from IMF Members Countries
This research scrutinize dynamics of use of IMF credit on the growth performance of the ten most heavily indebted countries of the world. The study employs a panel of ten countries during the period 1990-2022. Multiple tests, including LLC, IPS, Maddala-WU, and Fisher Augmented DF, reveals mixed order of integrations. Additionally, the panel co-integration tests by Pedroni, Kao, and Westerlund indicate existence of steady state equilibrium between growth performance and use of IMF loans taken by the sampled countries. The empirical results indicate that the use of IMF credit significantly and adversely affects the economic growth of these ten highly indebted countries. Moreover, the study identifies detrimental effects stemming from government expenditure, debt servicing, and inflation on economic growth. The study proposes that governments should implement austerity measures, search for alternative debt sources and control on imports and ensure proper utilization of IMF credit to save foreign reserves.
-
Heavily Indebted Countries, ARDL, Use of IMF, Panel Co-integration, Crowding out
-
(1) Talal Khan
M.Phil Scholar, Department of Economics, University of Science & Technology Bannu, KP, Pakistan.
(2) Zafir Ullah Khan
Chairman, Department of Economics, University of Science & Technology Bannu, KP, Pakistan.
(3) Muhammad Zubair Khan
Director, Institute of Management Sciences, University of Science & Technology Bannu, KP, Pakistan.
- Acar, S., Altıntaş, N., & Haziyev, V. (2023). The effect of financial development and economic growth on ecological footprint in Azerbaijan: an ARDL bound test approach with structural breaks. Environmental and Ecological Statistics, 30(1), 41–59. https://doi.org/10.1007/s10651-022-00551-6
- Aghion, P., & Bolton, P. (1997). A Theory of Trickle-Down Growth and Development. Review of Economic Studies, 64(2). 2https://doi.org/10.2307/2971707
- Introduction 3
- kinsola, F., & Odhiambo, N. M. (2017). Inflation and Economic Growth: a Review of The International Literature. Comparative Economic Research, 20(3), 41–56. https://doi.org/10.1515/cer-2017-0019
- Literature Review 4
- Al-Fadhat, F., & Nadhir, M. R. (2019). Foreign Investment and the Political Economy of Indonesian Capital Market in 2015-2016. Humanities and Social Sciences Reviews, 7(6). https://doi.org/10.18510/hssr.2019.7659
- Theortical Framework 5
- Al-Refai, M. F. (2015). Debt and Economic Growth in Developing Countries: Jordan as a Case Study. International Journal of Economics and Finance, 7(3). https://doi.org/10.5539/ijef.v7n3p134
- Model Specification 6
- Asante, G. N., Takyi, P. O., & Mensah, G. (2023). The impact of financial development on economic growth in sub-Saharan Africa. Does institutional quality matter? Development Studies Research, 10(1). https://doi.org/10.1080/21665095.2022.2156904
- Data and Methodology 7
- Asongu, S., Akpan, U. S., & Isihak, S. R. (2018). Determinants of foreign direct investment in fast-growing economies: evidence from the BRICS and MINT countries. Financial Innovation, 4(1) . https://doi.org/10.1186/s40854-018-0114-0
- Asteriou, D., Pilbeam, K., & Pratiwi, C. E. (2021). Public debt and economic growth: panel data evidence for Asian countries. Journal of Economics and Finance, 45(2). https://doi.org/10.1007/s12197-020-09515-7
- Asunka, B. A., Ma, Z., Li, M., Amowine, N., Anaba, O. A., Xie, H., & Hu, W. (2022). Analysis of the causal effects of imports and foreign direct investments on indigenous innovation in developing countries. International Journal of Emerging Markets, 17(5). https://doi.org/10.1108/IJOEM-08-2019-0609
- Atigala, P., Maduwanthi, T., Gunathilake, V., Sathsarani, S., & Jayathilaka, R. (2022). Driving the pulse of the economy or the dilution effect: Inflation impacting economic growth. PLoS ONE, 17(8 August). https://doi.org/10.1371/journal.pone.0273379
- Bakare, H., Kareem, R., & Oyelekan, B. (2015). Effects of Inflation rate on Economic Growth in Negeria (1986-2014). Developing Country Studies, 5(8). 11https://www.iiste.org/Journals/index.php/DCS/article/view/21800
- Bangura, S. A. F., Kitabire, D., & Powell, R. (2021). External Debt Management in Low-Income Countries. SSRN Electronic Journal. 12https://doi.org/10.2139/ssrn.1445725
- Barro, R. J. (1990). Government Spending in a Simple Model of Endogeneous Growth. Journal of Political Economy, 98(5, Part 2). https://doi.org/10.1086/261726
- Barro, R. J., & Lee, J. W. (2005). IMF programs: Who is chosen and what are the effects? Journal of Monetary Economics, 52(7). https://doi.org/10.1016/j.jmoneco.2005.04.003
- Chowdhury, A., & Mavrotas, G. (2006). FDI and growth: What causes what? World Economy, 29(1). https://doi.org/10.1111/j.1467-9701.2006.00755.x
- Clements, B., Bhattacharya, R., & Nguyen, T. Q. (2021). External Debt, Public Investment, and Growth in Low-Income Countries. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.880959
- Rodrik, D. (2009). The real exchange rate and economic growth. Brookings Papers on Economic Activity, 2008(2), 365–412. https://doi.org/10.1353/eca.0.0020
- Dey, S. R., & Tareque, M. (2020). External debt and growth: role of stable macroeconomic policies. Journal of Economics, Finance and Administrative Science, 25(50). https://doi.org/10.1108/JEFAS-05-2019-0069
- Do, T. M. H. (2019). Real exchange rate and economic growth: An empirical assessment for Vietnam. Asian Economic and Financial Review, 9(6). https://doi.org/10.18488/journal.aefr.2019.96.680.690
- Dreher, A. (2006). IMF and economic growth: The effects of programs, loans, and compliance with conditionality. World Development, 34(5 SPEC. ISS.). https://doi.org/10.1016/j.worlddev.2005.11.002
- Duodu, E., & Baidoo, S. T. (2022). The impact of capital inflows on economic growth of Ghana: Does quality of institutions matter? Journal of Public Affairs, 22(1). https://doi.org/10.1002/pa.2384
- Fosu, A. K. (2010). The external debt-servicing constraint and public-expenditure composition in sub-saharan Africa. African Development Review, 22(3). https://doi.org/10.1111/j.1467-8268.2010.00252.x
- Ghali, K. (2003). Government Spending, Budget Financing, and Economic Growth: The Tunisian Experience. The Journal of Developing Areas, 36(2).
- Ghourchian, S., & Yilmazkuday, H. (2020). Government consumption, government debt and economic growth. Review of Development Economics, 24(2). https://doi.org/10.1111/rode.12661
- Giri, A. K., Mohapatra, G., & Debata, B. (2023). Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship? Journal of Economic and Administrative Sciences, 39(1). https://doi.org/10.1108/jeas-03-2021-0060
- Gómezâ€Puig, M., Sosvillaâ€Rivero, S., & MartÄ±Ì nez-Zarzoso, I. (2022). On the heterogeneous link between public debt and economic growth. Journal of International Financial Markets, Institutions and Money, 77, 101528. https://doi.org/10.1016/j.intfin.2022.101528
- Harrod, R. F. (1939). An Essay in Dynamic Theory. The Economic Journal, 49(193). https://doi.org/10.2307/2225181
- Janeba, E., & Todtenhaupt, M. (2018). Fiscal competition and public debt. Journal of Public Economics, 168, 47–61. https://doi.org/10.1016/j.jpubeco.2018.10.001
- Kao, C. (1999). Spurious regression and residual-based tests for co-integration in panel data. Journal of Econometrics, 90(1). https://doi.org/10.1016/S0304-4076(98)00023-2
- Kasidi, F., & Said, A. M. (2013). Impact of external debt on economic growth : a case study of Tanzania. Advances in Management & Applied Economics, 3(4).
- Khan, M. S., & Haque, N. U. (1985). Foreign borrowing and capital flight: A formal analysis. Staff Papers - International Monetary Fund, 32(4).
- Kononenko, R. (2015, September 5). IMF Lending and Economic Growth: An Empirical analysis of Ukraine. arXiv.org. https://arxiv.org/abs/1509.01741v1
- Krugman, P. (1988). Financing vs. forgiving a debt overhang. Journal of Development Economics, 29(3). h ttps://doi.org/10.1016/0304-3878(88)90044-2
- Kumar, G., & Batra, S. (2023). Interrelationship Between Human Development, Financial Development and Economic Growth: Empirical Evidences from Indian Economy. Indian Journal of Human Development, 17(1), 60–81. https://doi.org/10.1177/09737030221146022
- Liu, C., & Guo, Q. (2019). Technology spillover effect in China: The spatiotemporal evolution and its drivers. Sustainability (Switzerland), 11(6). https://doi.org/10.3390/su11061694
- Frost, M. (2022). Thomas Malthus, Essay on The Principle of Population. In Routledge eBooks (pp. 501–503). https://doi.org/10.4324/9780429355653-83
- Manasseh, C. O., Abada, F. C., Okiche, E. L., Okanya, O., Nwakoby, I. C., Offu, P., Ogbuagu, A. R., Okafor, C. O., Obidike, P. C., & Nwonye, N. G. (2022). External debt and economic growth in Sub-Saharan Africa: Does governance matter? PLoS ONE, 17(3 March). https://doi.org/10.1371/journal.pone.0264082
- Mohsin, M., Ullah, H., Iqbal, N., Iqbal, W., & Taghizadeh-Hesary, F. (2021). How external debt led to economic growth in South Asia: A policy perspective analysis from quantile regression. Economic Analysis and Policy, 72. https://doi.org/10.1016/j.eap.2021.09.012
- Mtar, K., & Belazreg, W. (2023). On the nexus of innovation, trade openness, financial development and economic growth in European countries: New perspective from a GMM panel VAR approach. International Journal of Finance and Economics, 28(1). https://doi.org/10.1002/ijfe.2449
- Öncel, A., Saidmurodov, S., & Kutlar, A. (2023). Financial development, export and economic growth: Panel data evidence from Commonwealth of Independent States. Journal of International Trade and Economic Development. https://doi.org/10.1080/09638199.2022.2164045
- Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61(SUPPL.). https://doi.org/10.1111/1468-0084.61.s1.14
- Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446). https://doi.org/10.1080/01621459.1999.10474156
- Przeworski, A., & Vreeland, J. R. (2000). The effect of IMF programs on economic growth. Journal of Development Economics, 62(2). https://doi.org/10.1016/S0304-3878(00)00090-0
- Sandow, J. N., Oteng-Abayie, E. F., & Duodu, E. (2022). External debt and economic growth in Sub-Saharan Africa: does heterogeneity in the quality of public sector management make a difference? Heliyon, 8(9), e10627. https://doi.org/10.1016/J.HELIYON.2022.E10627
- Schneider, P. H. (2005). International Trade, Economic Growth and Intellectual Property Rights: A Panel Data study of Developed and Developing Countries. Journal of Development Economics, 78(2). https://doi.org/10.1016/j.jdeveco.2004.09.001
- Senadza, B., Fiagbe, A. K., & Quartey, P. (2017). The effect of External Debt on Economic Growth in sub-saharan Africa. International Journal of Business and Economic Sciences Applied Research, 11(1).
- Shabbir, S. (2013). SBP Working Paper Series, Does External Debt Affect Economic Growth: Evidence from Developing Countries. SBP Working Paper Series, 633.
- Smith, A., & Rogers, J. E. T. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. In Oxford University Press eBooks. https://doi.org/10.1093/oseo/instance.00043218
- Toktosunova, C., Sharsheeva, N., Abdukadyrova, G., Rasulova, N., & Esenamanova, S. (2021). Problems of the growth of the external public debt of the Kyrgyz republic. Estudios de Economia Aplicada, 39(5). https://doi.org/10.25115/eea.v39i5.5245
- Ubok-Udom, E. U. (1979). Development through debt: Rationalizing the costs of external borrowing. Inter economics, 14(4). https://doi.org/10.1007/BF02924273
- Vreeland, J. R. (2020). What is the IMF? International Monetary Fund (IMF). https://doi.org/10.4324/9780203962787-12
- Wang, R., Xue, Y., & Zheng, W. (2021). Does High External Debt Predict Lower Economic Growth? Role of Sovereign Spreads and Institutional Quality. Economic Modelling, 103. https://doi.org/10.1016/j.econmod.2021.105591
- Westerlund, J. (2007). Testing for Error Correction in Panel Data. Oxford Bulletin of Economics and Statistics, 69(6). https://doi.org/10.1111/j.1468-0084.2007.00477.x
- Wong, H. T. (2013). Real exchange rate misalignment and economic growth in Malaysia. Journal of Economic Studies, 40(3). https://doi.org/10.1108/01443581311283934
- Yoon, S. C., & Mah, J. S. (2020). Aid Inflows and Economic Growth: Grants and Loans in the Case Of Kenya*. Journal of Economic Development, 45(4)
- Yoon, S. C., & Mah, J. S. (2020). Aid Inflows and Economic Growth: Grants and Loans in the Case Of Kenya*. Journal of Economic Development, 45(4)
- Yoon, S. C., & Mah, J. S. (2020). Aid Inflows and Economic Growth: Grants and Loans in the Case Of Kenya*. Journal of Economic Development, 45(4)
- Zheng, X., Yu, H., & Yang, L. (2022). Technology imports, independent innovation, and China’s green economic efficiency: an analysis based on spatial and mediating effect. Environmental Science and Pollution Research, 29(24). https://doi.org/10.1007/s11356-021- 17499-y
- Zou, X. Z. H. (1999). Foreign technology imports and economic growth in developing countries. In World Bank policy research working paper. https://doi.org/10.1596/1813-9450-1412
Cite this article
-
APA : Khan, T., Khan, Z. U., & Khan, M. Z. (2023). Dynamics of Use of IMF Debt: Evidence from IMF Members Countries. Global Economics Review, VIII(II), 381-400. https://doi.org/10.31703/ger.2023(VIII-II).28
-
CHICAGO : Khan, Talal, Zafir Ullah Khan, and Muhammad Zubair Khan. 2023. "Dynamics of Use of IMF Debt: Evidence from IMF Members Countries." Global Economics Review, VIII (II): 381-400 doi: 10.31703/ger.2023(VIII-II).28
-
HARVARD : KHAN, T., KHAN, Z. U. & KHAN, M. Z. 2023. Dynamics of Use of IMF Debt: Evidence from IMF Members Countries. Global Economics Review, VIII, 381-400.
-
MHRA : Khan, Talal, Zafir Ullah Khan, and Muhammad Zubair Khan. 2023. "Dynamics of Use of IMF Debt: Evidence from IMF Members Countries." Global Economics Review, VIII: 381-400
-
MLA : Khan, Talal, Zafir Ullah Khan, and Muhammad Zubair Khan. "Dynamics of Use of IMF Debt: Evidence from IMF Members Countries." Global Economics Review, VIII.II (2023): 381-400 Print.
-
OXFORD : Khan, Talal, Khan, Zafir Ullah, and Khan, Muhammad Zubair (2023), "Dynamics of Use of IMF Debt: Evidence from IMF Members Countries", Global Economics Review, VIII (II), 381-400
-
TURABIAN : Khan, Talal, Zafir Ullah Khan, and Muhammad Zubair Khan. "Dynamics of Use of IMF Debt: Evidence from IMF Members Countries." Global Economics Review VIII, no. II (2023): 381-400. https://doi.org/10.31703/ger.2023(VIII-II).28