The burden of external debt in the South Pacific island countries

This paper identifies the determinants of external debt and investigates the relationship between debt and economic growth in a cross-section of South Pacific island countries. Models incorporating cross-country data is estimated using a variation of the generalised least squares method. The empirical results indicate that international reserves, exports, current account balance and unproductive government expenditure as strong determinants of external debt. The results also provide confirmation of the adverse effect of external debt and debt burden on Pacific island countries economic growth. Some policy implications are drawn.