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c development. It should be noted, however, that while economic development concentrates on the transformation of economic structures and institutions, the study of economic growth emphasizes on the use of mathematical models that describes the quantitative relationships between economic variables. Academic studies on external debt related issues and its impacts on growth have only exploded after the debt crisis that hit many developing countries in the early 1980s. This chapter presents some relevant literature on growth and external indebtedness in developing countries. 6

2.2 Impact of External Debt on Growth and Development 7

EXTERNAL DEBT AND ECONOMIC GROWTH IN THE ECOWAS 13

3.1 A Brief Economic history of the ECOWAS Countries 13

3.3 Summary and Conclusions 14

DATA AND methodology 16

EMPIRICAL RESULTS 23

5.1 Introduction 23

5.2 Unit Root Tests 23

5.2 Co Integration Analysis 25

The rationale of the co integration test is to determine whether a group of non –stationary series is co-integrated or not, as it is discussed in Chapter 4, if any two time series Xt and Y t are both I (1), and if error term, et (the residuals of the time series), which is defined as et =Y- β X t, is I (0), then Xt and Yt are said to be co-integrated. 25

5.2.1 Johansen Co Integration Test Results 25

5.4 Error Correction Model (ECM) 27

CONCLUSION AND RECOMMENDATIONS 30

6.1. Conclusion 30

6.2. Recommendation 31

LIST OF TABLES

LIST OF FIGURE

INTRODUCTION

1.1 Background of the Study

The debt burden issue on less developed countries can be traced to the early 1980’s after the oil price increase of the 1970’s. It was the product of reactions by the international community to “oil price shocks”. One of the legacies of Economic Community of West African State (ECOWAS) countries from the crisis has been an increasing debt stock and debt service payments, which constituted a major constraint to economic growth and social development (Elbadawi, et al. 1996).

In addition, Elbadawi, et al. (1996) maintain that ECOWAS countries spending on debt servicing was about one third of its public budget, which was about three times its education expenditure and nine times the health funds on servicing outstanding debts. They note that ECOWAS countries were only paying diminutive over half its planned debt service. Grants from contributor countries were then one-hundredth of the worth of debt service. The truth is that there was a lattice transfer of funds from ECOWAS countries to the developed countries.

Furthermore, according to Semenitari (2005), states that African countries’ especially ECOWAS countries was owing over an estimated overall foreign debt of US$28.347 billion as at December 31, 2001, consisted considerably of amount outstanding of principal, interest, as well as late interest, which have been consolidated to structure the current principal balance. So, one could view the negative effect not only of principal and interest arrears, but also of late interest which is interest charge on defaulted debt service payments. The specter that emerges from the dynamics is that of a problem of rising debt burden which if not arrested, would continue to invalidat