Inflation, Economic Growth and External Debt Dynamics: Evidence from Emerging Market Economies

This study aims to examine the dynamic relationships among inflation, economic growth and external debt in eight emerging market economies—Argentina, Brazil, China, India, Indonesia, Mexico, South Africa, and Türkiye—over the period 1990–2023. By employing the Bootstrap Panel Rolling Window Causality Analysis, the study uncovers the time-varying relationships between these variables as well as cross-country differences. The findings indicate that external debt positively influences inflation in Türkiye, while in Brazil, China, India, and South Africa, inflation contributes to the accumulation of external debt. The analysis also reveals that external debt positively contributes to economic growth in Argentina, whereas in Argentina, Brazil, India, Indonesia, Mexico, and Türkiye, economic growth exerts a negative influence on external debt. The results suggest that the effects of external debt on growth can be interpreted within the frameworks of the Debt Overhang Theory and the Growth-Cum-Debt Model. Highlighting the interaction between external debt, debt management, economic structure, and growth dynamics, the study underscores the importance of sustainable strategies and provides meaningful methodological and theoretical contributions to the literature.