Demand Management Policies, External Debt and Growth Nexus in SAARC Countries

Abstract

This study has focused on external debt and growth relations along with demand management policies in SAARC countries. Panel data have been collected for a sample time from 1990 to 2019. The ARDL is found suitable after getting mixed results from panel unit root tests. According to the results, external debt is retarding the process of economic growth in SAARC economies. Even when the relationship is explored in the scenario of demand management policies, it is still negative. But multilateral foreign debt is accelerating growth. The nonlinear relationship between external debt and growth is also examined via the Laffer curve. Some policy implications are driven such as the economies may explore and extend internal resources instead of relying on external debt. However, in case of dire needs multilateral external debt may be preferred. Moreover, demand management policies can play a vital role in this respect.