Analyzing the Impact of External Debt on The Financial Security of the Country

Abstract

The relationship between external debts and economic growth is important for the sustained economic development.
While most of past evidence records that the external debts are detrimendal to economic growth, the recent
literature on the international macro-finance suggest a novel approach to external debts. Since the debts are a type of
safe assets, which are uncertainty-insensitive assets, they are potential to contribute on the economic growth, especially
in the longrun. The debts not only place a burden on an economy’s buget as traditional approach, but also serve as store
of wealth, then, channelling savings into investment. The investment, in turn, can stimulates the economic growth rate.
But until now, there are quite little papers accounting for the safety of debts on the relationship between debts and growth.