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Asymmetric effect of government debt on GDP growth: evidence from Namibia

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  • Teboho Jeremiah Mosikari

    (Department of Economics, North-West University, Mmabatho, South Africa)

  • Joel Hinaunye Eita

    (School of Economics, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa)

Abstract

The objective of this study is to investigate the asymmetric relationship between government debt and GDP growth in Namibia. The study applied the non-linear autoregressive distributed lag (NARDL) methods to determine the asymmetrical effect of government debt on GDP growth. The estimated long-run parameters for positive and negative shocks of government debt are -0.104 and -0.738 respectively. The results suggest that a 1% increase in debt will be followed by a 0.104 decrease in GDP growth and that a 1% decrease in debt will produce a 0.738 increase in economic growth. This shows that the responsiveness of GDP growth to positive values of debt is different to that of negative values of debt. The responsiveness of GDP growth to negative values of debt is greater than to positive value of debt. This implies that it is important for Namibia to have manageable debt and fiscal sustainability in order to increase its GDP growth.

Suggested Citation

  • Teboho Jeremiah Mosikari & Joel Hinaunye Eita, 2021. "Asymmetric effect of government debt on GDP growth: evidence from Namibia," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 543-558.
    • Handle: RePEc:ipf:psejou:v:45:y:2021:i:4:p:543-558
    DOI: 10.3326/pse.45.4.7
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    References listed on IDEAS

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    Cited by:

    1. Elias A. Udeaja & Nathan Audu, 2023. "Asymmetric Effect of External Debt and Foreign Capital Flows on Economic Growth: New Evidence from Nigeria," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 9(3), pages 345-368, July.

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    More about this item

    Keywords

    government debt; economic growth; nonlinear; fiscal policy; Namibia;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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