Long-Term and Short-Term Impact of External Debt on Economic Growth in Laos: An ARDL Model Analysis

Keoudone Keothephar, Vilayvanh Srithilat, Khammai Bounphone
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Abstract

This study investigates the impact of external debt on the economic growth of Laos, with a specific focus on the evolving structure of external debt in the country spanning 1995 to 2020. It employs an Autoregressive Distributed Lag (ARDL) model to establish long-term cointegration among key economic variables. The variables under scrutiny include human capital, labor force participation, external debt, inflation, and exchange rates, which are analyzed for their roles in shaping economic growth in Laos. In the long term, the study identifies robust and statistically significant relationships. Notably, human capital and the labor force emerge as influential drivers of economic growth, with coefficients of 2.0594 and 0.0591, respectively. Conversely, there is a substantial negative correlation between the external debt ratio per GDP and inflation rate with economic growth. This indicates that increases in these variables are associated with diminished economic expansion over time. In the short term, the study reveals that human capital and labor force participation positively impact Laos' economic growth. In contrast, the short-term effects of the external debt ratio, inflation rate, and exchange rate are adverse, indicating potential economic challenges that need to be addressed promptly. Based on findings, this study provides valuable insights into the determinants of economic growth in Laos, both in the long and short terms. These findings can inform policymakers and researchers in the development of more effective economic strategies, taking into account Laos' unique economic context.
外债对老挝经济增长的长期和短期影响:一个ARDL模型分析
本研究调查了外债对老挝经济增长的影响,特别侧重于1995年至2020年期间该国外债结构的演变。采用自回归分布滞后(ARDL)模型建立关键经济变量之间的长期协整关系。审查中的变量包括人力资本、劳动力参与、外债、通货膨胀和汇率,分析了它们在塑造老挝经济增长中的作用。从长期来看,该研究确定了牢固且具有统计意义的关系。值得注意的是,人力资本和劳动力成为经济增长的重要驱动因素,其系数分别为2.0594和0.0591。相反,外债/ GDP比率和通货膨胀率与经济增长之间存在显著的负相关关系。这表明,随着时间的推移,这些变量的增加与经济扩张的减弱有关。在短期内,研究发现人力资本和劳动力参与率对老挝经济增长有积极影响。相比之下,外债比率、通货膨胀率和汇率的短期影响是不利的,表明潜在的经济挑战需要迅速解决。基于这些发现,本研究为老挝长期和短期经济增长的决定因素提供了有价值的见解。考虑到老挝独特的经济背景,这些发现可以为决策者和研究人员制定更有效的经济战略提供信息。
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