ABSTRACT
This chapter focuses on the empirical consequences of high debt in poor countries on economic growth, building on the stream of literature reviewed. In addition, on the ground of the hypothesis that this relationship could differ according to countries' specific characteristics, the chapter directly investigates the role played by institutions and policies in the debt-growth nexus. The plot of the data helped to highlight some outliers, generally related to the first observations in former communist countries. Bond, Hoeffler and Temple provide a useful insight in the GMM estimation of dynamic growth models, arguing that the pooled OLS and the Fixed-Effects estimators should be considered respectively as the upper and lower bound. The international community bears large costs to finance debt relief programs. An efficient use of these resources should require a careful cost-benefit analysis. The model is estimated by Two-Step System GMM, using Stata 10 SE package with XTABOND2 command.
