External debt burden and economic growth: evidence from Central Asia

The main goal of this article is to analyse the effects of external debt accumulation on economic growth amongst Central Asian countries. We have applied a time-series methodology utilising annual data from 2000–2017 to show that external debt has had a negative and significant effect on economic growth in Central Asian countries. We found that debt overhang will cause a higher marginal tax rate on the future output of each country, thus leading to an investment slowdown and reducing output growth by limiting productivity expansion. Moreover, we can affirm that the negative effect of external debt is often associated with the poor level of institutions and governance of Central Asian countries.