(FDI and ODA), both of which are considered to be crucial in the long term economic growth of least developed countries. Finally, we seek to stimulate the debate on the effectiveness of different forms of external debt on long term economic growth by using different specification of external debt stocks in addition to PPG, namely total and concessional debts. Our empirical approach builds on the works of Kumar and Woo (2010) and Clements et.al (2003).We follow closely the findings of Sala-i-Martin, Doppelhofer and Miller (2004) in selecting the core sets of growth determinants that have been established to have higher posterior inclusion probability; however, the estimated model variables are constrained by the available data. We control for the effects of foreign capitals, domestic capital, human capital, population growth and fiscal volatility. Issues of endogeneity, simultaneity and reverse causality, measurement bias and nonlinearity are addressed. We employ Bond system Generalized Methods of Moments (SGMM) as the primary estimation technique, however, we also report results based on fixed effects method for robust checks. Results from this study are crucial in shedding some light on whether the HIPCs and MDR and other debt forgiveness initiatives from bilateral donors have had any impact on the recently observed positive growth rates in LDCs. The rest of the paper is organized as follows; section II discusses the relevant literature, section III provides a descriptive analysis of trends in external debt, investment and macroeconomic performance, section IV, methodology and results and section V concludes.
(FDI and ODA), both of which are considered to be crucial in the long term economic growth of least developed countries. Finally, we seek to stimulate the debate on the effectiveness of different forms of external debt on long term economic growth by using different specification of external debt stocks in addition to PPG, namely total and concessional debts. Our empirical approach builds on the works of Kumar and Woo (2010) and Clements et.al (2003).We follow closely the findings of Sala-i-Martin, Doppelhofer and Miller (2004) in selecting the core sets of growth determinants that have been established to have higher posterior inclusion probability; however, the estimated model variables are constrained by the available data. We control for the effects of foreign capitals, domestic capital, human capital, population growth and fiscal volatility. Issues of endogeneity, simultaneity and reverse causality, measurement bias and nonlinearity are addressed. We employ system Generalized Methods of Moments (SGMM) as the primary estimation technique, however, we also report results based on fixed effects method for robust checks. Results from this study are crucial in shedding some light on whether the HIPCs and MDR and other debt forgiveness initiatives from bilateral donors have had any impact on the recently observed positive growth rates in LDCs. The rest of the paper is organized as follows; section II discusses the relevant literature, section III provides a descriptive analysis of trends in external debt, investment and macroeconomic performance, section IV, methodology and results and section V concludes. Bond
Evelyn%20Wamboye.docx