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Yann Nounamo
''What is the role of the quality of economic institutions in the relationship between external debt and growth? Evidence from the African franc zone''
( 2019, Vol. 39 No.1 )
The objective of this paper is to analyze the role of economic institutions in the relationship between external debt and economic growth in the African Franc Zone. The methodology focuses on Blundell and Blond's (1998) Generalized Moment Method (GMM). The sample includes 12 countries over the period 1985-2015. We adopted the classification of economic institutions proposed by Rodrik (2005) for the empirical analysis. We conclude from this that Economic institutions are a constraint on the economic performance of these countries: (i) The quality of market creation institutions has a negative impact on the link between debt and growth in the region. Similarly, market regulation institutions have a negative impact. ii) Market stabilization institutions have positive effects on the link between debt growth and growth. This means that to stimulate economic growth through debt, better institutions are needed to make external debt profitable for the growth for the African Franc Zone. (iii) For the whole area, we obtain an optimal debt threshold of 50.56% of GDP for the sample considered.
Keywords: External debt, economic institutions, growth, African franc zone
JEL: O1 - Economic Development: General
F4 - Macroeconomic Aspects of International Trade and Finance: General
Manuscript Received : Dec 30 2018 Manuscript Accepted : Mar 16 2019

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