The effect of foreign debt and macroeconomic indicators on economic growth in Iran

The effect of external debt on economic growth is a debatable issue between economists since the debt crisis in 1980’s.This study examined the effects of foreign debt on economic growth in Iran.The effect of bilateral and multilateral external debt separately, along with some macroeconomic variables on growth is investigated.In this regard, to estimate the specified research model, Auto Regressive Distributed Lag Approach for annual data has been used during the years 1359-1391. The results suggest that long-term and short-term bilateral foreign debt had positive but insignificant impact, while multilateral debt (borrowing from international institutions) had a positive andsignificant impact on economic growth in the period under review.So based on the theory ofdebt- growth threshold, it seems that over the last three decades, the external debt could contribute to the growth process.Also, other results of this study show that in the long run, capital, human capital and trade openness have a significant and positive effect on economic growth.