Does External Debt Lead to Growth in the Presence of Quality Institutions?

Abstract

The stock of external debt owed by low- and middle-income countries reached US $6.7 tril-lion in 2015 (World Bank, 2017). In 2015, ex-ternal debt accounted for 26 percent of the Gross National Income (GNI) of the low- and middle-income countries and 98 percent of their export receipts. In this study, we intend to examine the role that institutional quality plays in defining the debt-growth relationship. The objective is to under-stand whether the presence or absence of qual-ity institutions determines and influences the direction and magnitude of debt's effect on growth.