Abstract
This paper examines the relationship between external debt and economic growth for the middle and low income countries over the period 2002-2016. By performing dynamic panel threshold model, we found that the nexus between external debt and economic growth is nonlinear. Besides, results show that there exist a statistically negative relationship between external debt and economic growth above the threshold level of 15.28%, above which external debt decreases economic growth in the middle and low income countries. This paper supports the view that external debt should be contracted with a reasonable level to avoid the opposite effect on economic growth in the middle and low income countries.