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External debt and economic growth: moderating role of governance in South Asia Region

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Abstract

The current analysis explores the effect of external debt on economic growth and how better governance interacts with this relationship. For empirical assessment, we sample 20 years of data (2000–2019) of South Asian economies and consider the FMOLS and DOLS models to model the regression among the variables. The statistical analysis reveals a significant negative effect of both long- and short-term external debts, while governance has a significant positive effect on economic growth. In addition, the positive moderating role of governance was also observed in the nexus of external debt and economic growth. Enhancing governance can make external borrowing beneficial for economic progress. The empirical analysis posits multiple policies regarding the reduction of external borrowings, enhancement of the quality of governance, and effective utilization of external debt for development projects through better governance systems. By exploring the empirical relationship between external debt, governance, and economic growth, this study provides original evidence on how to enhance the utilization of external debt to ensure economic growth.

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Data availability

Data that support the findings of this study available at public domains named, and World Development Indicators, and Worldwide Governance Indicators, The World Bank.

Notes

  1. https://databank.worldbank.org/source/world-development-indicators.

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Funding

We received no funding support for the conduct of research.

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Authors and Affiliations

  1. School of Economics and Finance, Xi’an Jiaotong University, Xi’an, Shaanxi, People’s Republic of China

    Umar Farooq

  2. Amity Business School, Amity University Dubai, Dubai International Academic City, P.O. Box 345019, Dubai, United Arab Emirates

    Adel Ahmed

  3. College of Business, Al Ain University, Al Ain, United Arab Emirates

    Mosab I. Tabash

  4. Accounting and Financial Science Department, College of Administrative and Financial Science, Gulf University, Sanad, 26489, Kingdom of Bahrain

    Mujeeb Saif Mohsen Al-Absy

  5. Department of Business Administration, Faculty of Commerce, Tanta University, Tanta, Egypt

    Yasmeen Elsantil

Authors
  1. Umar Farooq
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  2. Adel Ahmed
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  3. Mosab I. Tabash
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  4. Mujeeb Saif Mohsen Al-Absy
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  5. Yasmeen Elsantil
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Correspondence to Umar Farooq.

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Farooq, U., Ahmed, A., Tabash, M.I. et al. External debt and economic growth: moderating role of governance in South Asia Region. Eurasian Econ Rev (2024). https://doi.org/10.1007/s40822-024-00264-0

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  • DOI: https://doi.org/10.1007/s40822-024-00264-0

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