The Effects of Continuous Debt on National Economic Growth
Keywords:
Debt; Economy; CrisisAbstract
This study examines how substantial external debt and its associated servicing obligations influence the economic growth of a national economy. The external debts of both Iraq and Iraq are assessed in a revised framework that employs conventional yet creatively applied economic models and econometric approaches. The research utilizes the Neoclassical growth model—integrating external sector factors, debt indicators, and various macroeconomic variables—to assess both linear and nonlinear impacts of debt on economic expansion and investment. Analytical techniques such as Ordinary Least Squares (OLS) and Generalized Least Squares (GLS) are used. Among the findings, the study confirms that external debt and its servicing requirements exert a negative effect on economic growth in both countries. Nevertheless, Iraq demonstrates relatively better performance in using foreign loans to support economic development. Furthermore, the results show that while external debt initially fosters growth in Iraq, beyond a certain level, it begins to hinder it, indicating the presence of nonlinear effects.
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