Md Atiqul Islam, Farhad Hossain
• Md Atiqul Islam: Professor, Department of Economics, University of Rajshahi, Rajshahi, Bangladesh.
• Farhad Hossain: MSS Student (2020-21), Department of Economics, University of Rajshahi. (Present) Lecturer, Department of Economics, Asian University of Bangladesh.
• Farhad Hossain: MSS Student (2020-21), Department of Economics, University of Rajshahi. (Present) Lecturer, Department of Economics, Asian University of Bangladesh.
Abstract
This study is to explore the external debt’s impact on GDP in Bangladesh. Since the independence external debt (ED) is increasing every. This objective of this paper is to investigate the link between external debt and GDP considering the data set for the period of 1972 to 2021 using time series econometric technique. The findings indicate a positive, statistically significant impact of external debt on GDP. The Johansen co-integration analysis implying that the GDP and ED have a long-term equilibrium association. Moreover, Granger causality test suggests that there is a bidirectional causality exist between GDP and ED in Bangladesh. Policy suggestions from this study revealed that as a developing country Bangladesh government may borrow foreign debts for the massive economic development. But government should use it properly for the development of the country especially for productive purposes.
Keywords: External Debt, GDP, Granger Causality, Johansen Co-integration, Bangladesh