Nigerian Journal of Banking and Financial Issues (NJBFI)

Assessing The Determinants Of Economic Growth In Heavily Indebted Poor Countries

Abstract

The research analyzed the factors that influence economic growth in 39 countries that are heavily indebted and poor, commonly referred to as HIPCs. The study utilized eight sets of data pertaining to economic indicators, education, and population from the years 1980 to 2021. The study employed the auto-regressive distributed lag (ARDL) technique to analyze the impact of various factors, including export volume, inflation, foreign aid, foreign direct investment, agricultural output, population growth, industrial sector output, foreign direct investment, and secondary school enrolment, on the economic growth of a group of 39 countries in both the short and long terms. Among the eight eco-social variables analyzed, only export volume and inflation demonstrate a significant impact on the economic growth of the nations. From the analysis, both in the short and long periods, export volume has a favorable impact on economic development (short run: coefficient = 0.601183, p = 0.0212; long run: coefficient = 0.488446, p = 0.0205). Both in the short and long periods, inflation has a detrimental impact on economic growth (short run: coefficient = -0.184358, p = 0.0385; long run: coefficient = -0.149787, p = 0.0542).. Further, it was found that exports granger caused GDP growth, while the latter itself granger caused inflation and secondary school enrolment. It was recommended that governments of HIPCs put in place more export boosting strategies, significantly reduce inflation and control population growth. Governments in the affected countries need to focus on the growing of the real sector of the economy through effective utilization of domestic savings and foreign financial aid to develop the sector.