Effect of External Public Debt on Economic Growth: an Empirical Analysis of East African Countries

4.5 Fixed Effects Model (FEM) 
The results obtained from the FEM are presented in Table 4.6. The table shows that both external 
and domestic debt had a negative relationship with GDP growth. However, the relationships 
were not statistically significant. Similarly, the control variables did not have a statistically 
significant relationship with GDP. 

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33 
Table 4.6: Fixed effects model results
GDP 
Coefficients 
Robust Std. errors 
t 
| |
Lnexternal debt 
-0.1414 
0.2801489 
-0.50 
0.648 
Inflation 
-.01328 
0.0596777 
-2.23 
0.112 
Interest rate 
0.0044 
0.0095437 
0.46 
0.679 
Lnexchange rate 
0.5055 
0.4652196 
1.09 
0.357 
Lncapital stock 
1.2928 
0.6514598 
1.98 
0.141 
Lndomesticdebt 
-0.4106 
0.4661343 
-0.88 
0.443 
Constant 
-15.3318 
14.75209 
-1.04 
0.375 
Sigma_u 
1.3070416 
Sigma_e 
6.2692613 
Rho 
0.04165508 
4.6 Random Effects Model (REM) 
The random effects model results are presented in tablem4.7. The results show that external debt 
had a negative relationship with GDP growth. The relationship was statistically significant at 5% 
level. Domestic debt, on the other hand, had a negative but insignificant relationship with GDP. 
Capital stock had a positive and significant relationship with GDP. However, other control 
variables did not have a statistically significant relationship with GDP.

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34 
Table 4.7: Random effects model results 
GDP 
Coefficients 
Robust Std. errors 
Z 
| |
Lnexternal debt 
-0.6839 
0.1843535 
-3.71 
0.000 
Inflation 
-0.1036 
0.0653517 
-1.59 
0.113 
Interest rate 
-0.0047 
0.0134728 
-0.35 
0.729 
Lnexchange 
rate 
0.6403 
0.4325253 
1.48 
0.139 
Lncapital stock 
1.1400 
0.5616848 
2.05 
0.041 
Lndomestic 
debt 
-0.1394 
0.4289831 
-0.33 
0.745 
Constant 
-4.8408 
9.011409 
-0.54 
0.591 
Sigma_u 
0 
Sigma_e 
6.2693 
Rho 
0