Factors Affecting External Debt in Transition Economies: The Case of Central Asia and the Caucasus

This study is to examine the key factors affecting external debts for the Central Asia and theCaucasus economies between the years 1995-2017 by using panel data analysis. Panel regression resultsshow that public expenditures and the debt service have positive effect on external debt, while currentaccount of the balance, inflation rate and domestic savings have a negative, and also significant effecton external debt. The results of this study show that foreign debt is being used as a significant sourceof financing for public expenditures, foreign debt repayments, and the current account deficit in thecountries of Central Asia and the Caucasus.