Analysis of the Relationship between External Debt and Economic Growth in Central Asian Countries

In the literature, studies on the relationship between external debt and economic growth are generally shaped around general theoretical and empirical frameworks. This study aims to shed light on the special conditions of the relationship in this region by addressing the external debt structure and economic growth performance of Central Asian countries. Although Central Asian countries entered the independence process with zero debt in 1991, they have received significant amounts of foreign debt and aid to date. The aim of the study is to empirically analyze the relationship between external debt and economic growth in Central Asian countries, based on available statistical data. In the application part of the study, the relationship between the variables was examined with the Westerlund (2007) cointegration test using data from 1995-2022 in Central Asian countries. Panel FMOLS method was used to estimate long-term coefficients between variables. According to the results, the long-term regression coefficient between external debt and economic growth in Central Asian countries is -0.1493. This means that when the external debt stock increases by 1% in these countries, economic growth decreases by approximately 0.15%. When evaluated on a country basis, the relationship between external debt and economic growth was negative in Kazakhstan, Kyrgyzstan and Tajikistan, while it was found positive in Uzbekistan. The results found for Turkmenistan are statistically insignificant. The findings are expected to provide guidance for economic policy makers, academics and international stakeholders.