What determines external debt tipping points?

•This paper has investigated the nexus between external debt export growth.•We determine whether the tipping points vary based on country characteristics.•Countries with larger foreign reserves are able to hold larger external debt ratios.•Countries with deeper financial markets are able to manage larger debt shares.•Countries with one or more financial crises are likely to have lower debt tolerance.

This paper is interested in the nexus between external debt and export competiveness. Specifically, while we find that once external debt exceeds a certain threshold it is negatively associated with export growth, we are interested in determining whether the tipping points vary based on country characteristics. We test various hypotheses, including extent of exchange rate flexibility, size of foreign exchange reserve holdings, bond market development, degree of banking sector concentration and history of financial crises.