External Debt and Economic Growth in Transition Countries: Case of Kyrgyzstan

In many developing countries out of shortage of savings and capital external resources as external debt, foreign direct investment and transfers are play significant role in the fostering economic growth and development. Goal of this paper is to investigate the impact of external public debt, current transfers and foreign direct investments on GDP in the Kyrgyz Republic. Using quarterly data for the period 2000Q1-2017Q3 and the ARDL cointegration approach it was found that a cointegration relation between current transfers, external debt, FDI and GDP. According to results, current transfers’ contribution to the country’s economy is more than government debts. It is suggested that the government should focus more on foreign direct investments than foreign debts and current transfers by considering the long term.