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This paper estimates the nexus of inter-relationships between public and private external debts accumulation, capital accumulation and production within a simultaneous equation system using panel data for the period 1970-1988 from highly indebted developing countries clustered into three distinct regions: Latin-America, Asia-Pacific and Sub-Saharan Africa. The estimation results indicate that the full effects of the public and private external debts on GNP are small and of an opposite sign, whereas an increase in the GNP level raises substantially the public and private external debts. These findings support Bulow-Rogoff’s proposition that the external debts of developing countries are not a primary cause of economic slowdown.