Abstract
This paper uses data from 10 countries of the African franc zone from 1996 to 2017, to gauge the effect of external debt on industrialization in the presence of non-linearity. Our analyzes are done based on two aspects. Firstly, using a Panel Smooth Transition Regression (PSTR), our results show that there is a non-linear relationship between external debt and industrialization in the African franc zone, which depends on the level of the external debt stock, the threshold is $58.91 \%$ of GDP. While before this threshold, external debt has no direct effect on industrialization, after this threshold it is harmful to it. Secondly, an analysis in two periods (1996-2006 and 2007-2017) by the GLS and SUR methods shows that before 2006, the external debt was an asset for industrialization but after, it gave way to domestic credit. Thus, the external debt has become obsolete after reaching the completion point of the HIPC initiative, and would be a danger for the industrialization of the franc zone in the event of excess.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have