The Role of External Debt on Economic Growth: Evidence from Pakistan Economy

Abstract

External debt plays a major role in shaping the economic activity of any country. The purpose of the study is to determine the role of external debt on economic growth in Pakistan economy. The study incorporate Gross domestic product (GDP) as a measure of economic growth and gross domestic saving (GDS), gross capital formation (GCF) and external debt stock (EDS) as measure of economic debt. OLS regression model has been employed along with descriptive statistics over the time series data for 39 years. The statistical findings of the study reveal that gross capital formation (GCF) and external debt stock has significant positive effect on Pakistan GDP while gross domestic saving does not have significant impact on GDP of Pakistan.

Keywords: External Debt, Gross Domestic Product, and Economic Growth.