THE INTERACTION AMONG FOREIGN DEBT, CAPITAL FLOWS, AND GROWTH - CASE-STUDIES

This paper develops and tests a simultaneous equation model to examine the interaction between debt servicing, inflow of foreign capital, an d economic growth. The analysis is applied to three heavily indebted N orth African countries-namely Algeria, Egypt, and Morocco. The results based on ordinary least squares and two-stage least squares methods s uggest that servicing a heavy debt could have an adverse impact on eco nomic growth and capital inflow which in turn worsens the debt problem .