Does external debt as a new determinants of fiscal policy influence sustainable economic growth: implications after COVID-19

Abstract

External debt correlation and the sustainable economic development pathway within the South Asian sub-region is analysed in this research paper. The longitudinal root-analysis, the pooled ordinary least square, quantile estimation, and output estimation were utilized to evaluate the data obtained from the World Bank Development Indicators for the period of 2000–2018. We discovered that total external debt and external debt services affect 39% plus 31%, respectively, after the robust regression analysis was carried out. Besides that, the findings demonstrate direct expansionary impacts of fiscal policy crosswise in developing economies within the study timeframe. Remarkably, the advancements in state establishments encourage the “gathering impact” of fiscal policy implementation. The findings depict that the entire circumstances set a stiffer restraint on public expenditure, indicating a self-losing fiscal austerity situation which entails the impact of the company’s liabilities. Inversely, the unrestrained countercyclical policy bars the knock-on impact of external problems, resulting in an improved economic system activity performance as well as decreasing the probability of economic predicaments after COVID-19.