The role of institutions in the relationship between foreign debt and economic growth in Latin American countries, 2000-2019

Abstract

This article studies the role of institutional quality, through indicators of governance, in the relationship between external debt and economic growth in Latin American countries during the period 2000-2019. The panel coefficient estimation technique (fully modified OLS) is used. The estimates suggest that improving institutional quality increases the positive impacts of external debt on GDP growth. This leads to the need to implement measures to improve institutional quality, because poor debt management, such as deviations to
non-productive activities, have their origin in institutional failures.