External Debt and Manufacturing Sector’s Performance in MINT Countries: Evidence from Dynamic Heterogeneous Panel Estimation Techniques
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Date
2024
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Journal ISSN
Volume Title
Publisher
Journal of the Knowledge Economy
Abstract
The study assesses external debt’s impact on MINT countries’ (Mexico, Indonesia,
Nigeria, and Turkiye) manufacturing sector’s performance during the 1980–2021
period, using dynamic heterogeneous panel methods (i.e. dynamic fixed effects,
mean group, and pooled mean group estimators). The findings portray the presence
of long-term relation between external debt and manufacturing performance (alongside
external debt service, inflation rate, population size, exchange rate, FDI, and
agricultural output) based on the Kao’s residual cointegration test. The empirical
outcomes portray a dampening impact of external debt on manufacturing sector’s
performance during the short and long term. Moreover, external debt servicing, FDI,
population size, and inflation rate promote the sector’s performance, but exchange
rate (depreciation) hurts manufacturing performance. Furthermore, the Dumitrescu-
Hurlin heterogeneous panel causality test portrays a one-way causality from external
debt servicing (and exchange rate) to manufacturing sector’s performance and a
two-way causality between manufacturing sector and population (and FDI and agricultural
output). Thus, policies aimed at lowering external debt, lessening exchange
rate variability and inflation rate, and boosting inward FDI are recommended to promote
the sector’s performance
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Keywords
Manufacturing sector · External debt · MINT countries · Dynamic panel techniques