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External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021)

Received: 1 March 2022     Accepted: 25 March 2022     Published: 8 April 2022
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Abstract

The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are responsible for the external debt problem in Sierra Leone. Data employed in this study are secondary and were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt to Gross Domestic Product (GDP) ratio, external debt service to export earnings ratio and terms of trade were specified in the model and tested for stationarity using unit root tests. The study also employed the ordinary least square (OLS) technique for the purpose of estimating the relevant parameters of the model. Various diagnostic tests are carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative nexus between external debt and economic growth in Sierra Leone for the period under study signifying that debt accumulation impacts adversely on the country’s long-run growth trajectory which confirms debt “overhang” problem in Sierra Leone. This is clearly evident in the coefficients of the variables representing debt as a ratio of GDP, debt service as a ratio of export earning and terms of trade. The study, therefore, proffers certain recommendations in line with the findings.

Published in International Journal of Economics, Finance and Management Sciences (Volume 10, Issue 2)
DOI 10.11648/j.ijefm.20221002.13
Page(s) 54-66
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

External Debt, External Debt Accumulation, Debt Overhang, Indebtedness, Debt Service, GDP, Economic Growth

References
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  • APA Style

    Sylvester Bob Hadji. (2022). External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021). International Journal of Economics, Finance and Management Sciences, 10(2), 54-66. https://doi.org/10.11648/j.ijefm.20221002.13

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    ACS Style

    Sylvester Bob Hadji. External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021). Int. J. Econ. Finance Manag. Sci. 2022, 10(2), 54-66. doi: 10.11648/j.ijefm.20221002.13

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    AMA Style

    Sylvester Bob Hadji. External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021). Int J Econ Finance Manag Sci. 2022;10(2):54-66. doi: 10.11648/j.ijefm.20221002.13

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  • @article{10.11648/j.ijefm.20221002.13,
      author = {Sylvester Bob Hadji},
      title = {External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021)},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {10},
      number = {2},
      pages = {54-66},
      doi = {10.11648/j.ijefm.20221002.13},
      url = {https://doi.org/10.11648/j.ijefm.20221002.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20221002.13},
      abstract = {The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are responsible for the external debt problem in Sierra Leone. Data employed in this study are secondary and were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt to Gross Domestic Product (GDP) ratio, external debt service to export earnings ratio and terms of trade were specified in the model and tested for stationarity using unit root tests. The study also employed the ordinary least square (OLS) technique for the purpose of estimating the relevant parameters of the model. Various diagnostic tests are carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative nexus between external debt and economic growth in Sierra Leone for the period under study signifying that debt accumulation impacts adversely on the country’s long-run growth trajectory which confirms debt “overhang” problem in Sierra Leone. This is clearly evident in the coefficients of the variables representing debt as a ratio of GDP, debt service as a ratio of export earning and terms of trade. The study, therefore, proffers certain recommendations in line with the findings.},
     year = {2022}
    }
    

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  • TY  - JOUR
    T1  - External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021)
    AU  - Sylvester Bob Hadji
    Y1  - 2022/04/08
    PY  - 2022
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    DO  - 10.11648/j.ijefm.20221002.13
    T2  - International Journal of Economics, Finance and Management Sciences
    JF  - International Journal of Economics, Finance and Management Sciences
    JO  - International Journal of Economics, Finance and Management Sciences
    SP  - 54
    EP  - 66
    PB  - Science Publishing Group
    SN  - 2326-9561
    UR  - https://doi.org/10.11648/j.ijefm.20221002.13
    AB  - The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are responsible for the external debt problem in Sierra Leone. Data employed in this study are secondary and were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt to Gross Domestic Product (GDP) ratio, external debt service to export earnings ratio and terms of trade were specified in the model and tested for stationarity using unit root tests. The study also employed the ordinary least square (OLS) technique for the purpose of estimating the relevant parameters of the model. Various diagnostic tests are carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative nexus between external debt and economic growth in Sierra Leone for the period under study signifying that debt accumulation impacts adversely on the country’s long-run growth trajectory which confirms debt “overhang” problem in Sierra Leone. This is clearly evident in the coefficients of the variables representing debt as a ratio of GDP, debt service as a ratio of export earning and terms of trade. The study, therefore, proffers certain recommendations in line with the findings.
    VL  - 10
    IS  - 2
    ER  - 

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Author Information
  • Department of Economics & Commerce, University of Sierra Leone, Freetown, Sierra Leone

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