External Debt and Economic Growth: An Empirical Evidence of Thailand

Abstract

This study aimed to investigate the long-term relationship between external debt and Thailand’s GDP using quarterly time series data between 2005-2021. The study employed Johansen & Juselius (1990)’s procedure in order to investigate the relationships. Macroeconomic variables used in the model included CPI, short-term external debt (or long-term external debt), money supply, degree of trade openness, real interest rate and GDP. The empirical results showed the long-term cointegration between short-term external debt and GDP as well as long-term external debt and GDP. Moreover, by using Wald Test, this study found that external debt did not Granger cause Thai GDP directly, in cases of both short-term external debt and long-term external debt. Yet, external debt Granger caused Thailand’s GDP indirectly in cases of both short-term external debt and long-term external debt in several dimensions. For instance, long-term external debt Granger caused real interest rate and real interest rate then Granger caused GDP.