Title: External debt in macroeconomics: a review

Authors: Kelvin Lee; Dodo J. Thampapillai

Addresses: School of Politics and International Relations, Australian National University, Canberra ACT, 2601, Australia ' Lee Kuan Yew School of Public Policy, National University of Singapore, Bukit Timah Campus, 259772, Singapore

Abstract: The paper provides a concise review of the treatment of external debt in macroeconomic analyses. In this regard, the paper considers: the development of indicators to quantify external debt alongside theoretical and empirical developments in which the indicators are utilised. Following the inherent limitations, the theoretical and empirical studies tend to employ more than one indicator. Both theoretical and empirical frameworks are distinguished in terms of whether they are static or dynamic in nature. The theoretical studies were also distinguished in terms of the utilisation of discrete and continuous frameworks. The empirical models were distinguished with reference to linearity and nonlinearity of the underlying premises. The review enables the reader to appreciate the relative advantages and disadvantages of the various frameworks and their contextual relevance. A key theme that runs through the studies reviewed is the impact of external debt on economic performance. The results, which are context specific, are mixed.

Keywords: external debt; debt-to-GDP ratio; debt service; difference equations; differential equations; static modelling; dynamic modelling; macroeconomics; GDP; gross domestic product; economic performance.

DOI: 10.1504/IJEBR.2016.079561

International Journal of Economics and Business Research, 2016 Vol.12 No.2, pp.103 - 118

Received: 18 Mar 2016
Accepted: 27 May 2016

Published online: 02 Oct 2016 *

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