External Debt and Economic Growth in Tunisia

This paper investigates the external debt effect on economic growth in Tunisia. Our empirical methodology is based on the autoregressive distributed lag approach. We find that in the long- as well as in the short-run, external debt had a negative effect on growth over the 1970-2010 period. The long-run effect was slightly higher in the period before the Ben Ali's presidency than in the period after. However, during his period, the external debt short-run effect was the double of that observed during the period before. These results suggest that an external debt reduction should favor economic growth in Tunisia.