A study on the relationship between domestic and external debt on the economic growth of selected developing countries / Anis Syahiera Zulkiffli

For a country to be developed, the needs for an amount of capital are crucial to generate production and investment (Lee & Ng, 2015). In a situation where government deals with budget deficit where its expenditure exceeds its revenue, the issuance of debt is important to finance government's expenditure and investment. The issuance of debt or capital borrowed can be classified in the form of domestic and external debt. Domestic and external debt also can be known as public debt (Abd Rahman, 2012). From the available studies, the results have shown consistency with the existing literature that found debt and economic growth have negative association with each other which means an increasing of the amount of debt will give severe impact on the economic growth. Others studies have found that in the short period, the issuance of debt will affect the economic growth in a positive way. The issue arises on whether debt issuance can enhance economic growth or will give negative impact on the economic growth.