DefinePK

Abstract

Objective: This study examines the relationships between external debt, trade fluctuations, and exchange rates concerning economic growth in South Asia. It aims to assess the impact of these macroeconomic variables on economic development and provide policy recommendations for sustainable growth.
Research Gap: While previous research has explored the impact of external debt and trade fluctuations on economic growth, limited studies have conducted a comparative analysis across South Asian economies using advanced econometric techniques. Furthermore, the short- and long-term effects of exchange rate fluctuations on economic stability remain underexplored. This study fills these gaps by employing a comprehensive econometric approach to analyze data from Pakistan, Sri Lanka, and Bangladesh.
Design/Methodology/Approach: The study utilizes data from the World Development Indicators (1990-2022) and applies pooled OLS, quantile regression, and PMG/ARDL models to test its hypotheses. These methods allow for a robust examination of both short- and long-term effects on economic growth.
Theoretical / Practical Implications of the Findings: The results support the debt overhang theory, indicating that external debt negatively impacts economic growth by diverting resources from productive investments and reducing investor confidence. Trade fluctuations positively influence long-term growth but exhibit short-term volatility due to global trade dynamics and persistent trade deficits. Exchange rate stability is found to be crucial for sustained economic growth, though short-term effects depend on various economic conditions.
Originality/Value: This study contributes to the literature by offering a multi-country econometric analysis of South Asia, addressing both short- and long-term economic impacts, and recommending policy interventions for sustainable growth.