Effects of External Debt Burden on LDC'S Investments: Empirical Evidence from Nigeria
Michael Moughalu* (Professor of Fiance,Keela College of Business Pittburg State University,Kansas, USA ), Chinedu B. Ezirim** (Senior Lecturer, Department of Finance and Banking University of Port Harcourt, Nigeria)
Download Article | Published On 01/02/2006

Abstract

This article attempts to answer the question of whether the external debt stock and associated servicing always discourage domestic investments in less-developed countries as claimed by some authors.Use was made of a comparative modeling approach involving multiple log-linear regression, distributed lag and autoregressive models. Comparative estimation methods were also employed, including the OLS. Cochrane-Orcutt, Maximum Likelihood, and instrumental variable techniques against time-series annual Nigerian data .fi·Oin 1970 through 2001. The results, among others, indicate that both external debt stock and debt sercive are not always disincentives to domestic investments. The debt service (deht burden) variable particularly holds some positive effects for Nigeria domestic investments especially when such payments attract furrther capital inflow and the externally -borowwed funds are put to best economic uses. In this light,.developing countries may have to change their orientation which is biased towards debt forgiveness- and see some good in debt-senicing as a proper management strategy

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