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Social Indicators Research

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02-03-2022 | Original Research

Impact of the External Debt on Standard of Living: A Case of Asian Countries

Authors: Noman Arshed, Sidra Nasir, Muhammad Ibrahim Saeed

Published in: Social Indicators Research | Issue 1/2022

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Abstract

This study discusses the basic purpose of external debt: to finance poverty alleviation and bring progress in a country in a time of crisis rather than increase the burden on the economy. Several empirical studies explored the concept of optimal debt, but they often assume a particular nonlinear specification. This study examines the impact of long run and short run external debt on the living standard for selected 23 high indebted Asian countries for the time period 1980–2020. The quadratic effects of external debt are assessed using the Two-Step Panel Quantile ARDL model. This model controls the unobserved heterogeneity, serial correlation, miss-specification and non-normality to ensure robust debt effect on living standards. This study reveals diminishing returns in external debt, whereby debt will be harmful to the standard of living beyond the estimated threshold. The estimated model also proposes that small and effective debt-based policy interventions are beneficial.

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Title: Impact of the External Debt on Standard of Living: A Case of Asian Countries
Authors: Noman Arshed
Sidra Nasir
Muhammad Ibrahim Saeed
Publication date: 02-03-2022
Publisher: Springer Netherlands
Published in: Social Indicators Research / Issue 1/2022
Print ISSN: 0303-8300
Electronic ISSN: 1573-0921
DOI: https://doi.org/10.1007/s11205-022-02906-9

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