Debt dependency, debt relief, and macroeconomic policies: how does the structure of external and domestic debt affect the well being of a country’s citizenry?

Abstract

The research expands the scope of the World System and Dependency theories that emphasize the deleterious effects of the extent of external debt held by multilateral institutions (Chase-Dunn, 1975; Sell and Kunitz, 1986-87; Meldrum, 1987; Harsch, 1989; Bradshaw and Huang, 1991; Bradshaw et al., 1993) and the structure of capital formation (Chase-Dunn 1975;Bornschier, Chase-Dunn, and Rubinson 1978; Bornschier and Chase-Dunn,1985; Timberlake and Kentor, 1983; Bradshaw, 1987; Walton and Ragin, 1990; Dixon and Boswell, 1996; Firebaugh, 1996) on the growth and development of Third World Countries. This research primarily examines the relationship between external debt held by multilateral development institutions and central government debt. A major barrier to social and economic development in developing countries is malnutrition and the inability of individuals to maintain a healthy standard of living and be economically and socially productive. The major findings on the direct and indirect effect of external debt and the solvency of a domestic economy on the health and nutritional status of women and children were: External debt as measured as a percent of GDP did produce slight but statistically significant direct effects on under-five infant mortality. Central government debt as measured as a percent of GDP demonstrated a direct effect only with under-five mortality and it was modest at best. Gross domestic investment measured as a percent of GDP also exhibited a weak direct effect on under-five infant mortality and percent total immunized. As expected, external debt did demonstrate a substantial and statistically significant direct effect on central government debt. The results of the path analysis reveal that external debt consistently produced an indirect effect, operating through central government debt, on measures of under-five mortality, percent children immunized, and children wasting and stunting. However, the magnitude fluctuates considerably and their statistical significance drops to below acceptable levels on childhood immunizations and the nutritional measures.