Impact of Domestic and External Debt on Economic Growth of Pakistan

Sustainable economic growth has crucial importance for all economies, especially for the developing economies like Pakistan, which faces many different challenges as compared to developed countries in boosting up its economic growth in order to lower its debt burden. This book examines the determinants of economic growth for Pakistan, the impact of domestic debt and external debt on the economic growth of Pakistan separately over period of 1980 to 2010, using Ordinary Least Square (OLS) approach to Cointegration, Unit Root Testing, Serial Correlation Testing, test for checking Heteroskedasticity, Correlogram and CUSUM test of stability. The findings suggested an inverse relationship between domestic debt and economic growth and also the relationship between external debt and economic growth was found to be inverse. These relationships were found to be significant as well. Some policy implications for coming out of debt overhang scenario are also presented.