The impact of external public debt on per capita income: In the case of common market for Eastern and Southern Africa (COMESA)

This study examines the relationship between external public debt and real per capita income growth of Common Markets for Eastern and Southern African countries (COMESA). The study uses panel data covering the period between 1990-2018. We applied dynamic random effect, dynamic fixed effect, and generalized method of moments (GMM) models. Following the literature, we focus on variables of real per capita income (as a proxy for growth), gross general government debt, short-term external debt stock, external debt stock (% of GNI), external debt stock guarantee, long-term external debt stock, gross capital formation as an instrument for physical capital, labor force, real inflation rate, trade openness, external debt service, and debt service percentage of export. Our explanatory variables are gross government debt, short-term external debt stock, external debt stock (% of GNI), external debt stock guarantee, long-term external debt stock, debt service percentage of export, and external debt service, while the rest are used as control variables. Data come from the World Bank Development Indicators (WDI) and the International Monetary Fund (IMF). Keywords: Budget Deficits; COMESA; Dynamic Panel; Economic Growth; Gross Debt; GMM