IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2018-06-6.html
   My bibliography  Save this article

Public Debt and Economic Growth: Evidence From Africa

Author

Listed:
  • Emmanuel Yeboah Lartey

    (University of Ghana Business School, BOX LG78, Accra, Ghana,)

  • Alhassan Musah

    (Dominion University College, School of Business, PMB CT69, Accra, Ghana)

  • Bismark Okyere

    (Dominion University College, School of Business, PMB CT69, Accra, Ghana)

  • Abdul-Nasir Yusif

    (Market Risk Manager-Ecobank Ghana Ltd., Accra, Ghana)

Abstract

There is no doubt that every country needs funding to foster economic growth and development. However, such funding needs to be at levels deemed sustainable and closely in line with the government's fiscal and monetary policies. To this end, there is an urgent need for policymakers in governments, central banks, and international policy organizations to understand the effects of public debt on economic growth. This study used 50 African countries from 1980 to 2015 to assess the impact of public debt on economic growth. The study employed an Ordinary Least Square (OLS) estimation technique for a static panel regression model and the Generalised Method of Moment (GMM) estimation technique for a dynamic panel regression model for the analysis. The empirical results from both estimation techniques suggest a statistically significant negative relationship between public debt and economic growth. The results also provide evidence that the relationship between public debt and economic growth is non-linear. The study also found that inflation and government consumption expenditure have a statistically significant negative relationship with economic growth whereas capital formulation, population growth and openness of trade have a statistically significant positive relationship with economic growth.

Suggested Citation

  • Emmanuel Yeboah Lartey & Alhassan Musah & Bismark Okyere & Abdul-Nasir Yusif, 2018. "Public Debt and Economic Growth: Evidence From Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 8(6), pages 35-45.
    • Handle: RePEc:eco:journ1:2018-06-6
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/7057/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/7057/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
    2. Ruth Judson & Athanasios Orphanides, 1999. "Inflation, Volatility and Growth," International Finance, Wiley Blackwell, vol. 2(1), pages 117-138, April.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    4. Burda, Michael & Wyplosz, Charles, 2017. "Macroeconomics: a European Text," OUP Catalogue, Oxford University Press, edition 7, number 9780198737513, December.
    5. Reinhart, Carmen M. & Reinhart, Vincent & Rogoff, Kenneth, 2015. "Dealing with debt," Journal of International Economics, Elsevier, vol. 96(S1), pages 43-55.
    6. Schneider, Patricia Higino, 2005. "International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 529-547, December.
    7. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    8. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    9. Checherita-Westphal, Cristina & Rother, Philipp, 2012. "The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area," European Economic Review, Elsevier, vol. 56(7), pages 1392-1405.
    10. Umutlu, Mehmet & Akdeniz, Levent & Altay-Salih, Aslihan, 2010. "The degree of financial liberalization and aggregated stock-return volatility in emerging markets," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 509-521, March.
    11. Tsangyao Chang & Steven Caudill, 2005. "Financial development and economic growth: the case of Taiwan," Applied Economics, Taylor & Francis Journals, vol. 37(12), pages 1329-1335.
    12. repec:wbk:wbpubs:12425 is not listed on IDEAS
    13. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    15. Sophia Dimelis, 2005. "Spillovers from foreign direct investment and firm growth: technological, financial and market structure effects," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 85-104.
    16. Tsangyao Chang & Chien-Chiang Lee & Chi-Hung Chang, 2014. "Does insurance activity promote economic growth? Further evidence based on bootstrap panel Granger causality test," The European Journal of Finance, Taylor & Francis Journals, vol. 20(12), pages 1187-1210, December.
    17. Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc.
    18. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    19. Michael Clemens & Samuel Bazzi, 2009. "Blunt Instruments: On Establishing the Causes of Economic Growth," Working Papers 171, Center for Global Development.
    20. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
    21. repec:bla:intfin:v:2:y:1999:i:1:p:117-38 is not listed on IDEAS
    22. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12426.
    23. Ranjan Kumar Dash & Chandan Sharma, 2008. "Government Expenditure and Economic Growth: Evidence from India," The IUP Journal of Public Finance, IUP Publications, vol. 0(3), pages 60-69, August.
    24. Huilin Lin & Ryh-Song Yeh, 2005. "The interdependence between FDI and R&D: an application of an endogenous switching model to Taiwan's electronics industry," Applied Economics, Taylor & Francis Journals, vol. 37(15), pages 1789-1799.
    25. Arusha Cooray, 2009. "Government Expenditure, Governance and Economic Growth," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 51(3), pages 401-418, September.
    26. J. E. Meade, 1958. "Is The National Debt A Burden?," Oxford Economic Papers, Oxford University Press, vol. 10(2), pages 163-183.
    27. Victor Owusu-Nantwi & Christopher Erickson, 2016. "Public Debt and Economic Growth in Ghana," African Development Review, African Development Bank, vol. 28(1), pages 116-126, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oliver Asiamah & Samuel Kwaku Agyei, 2023. "Information sharing offices and economic growth in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 211-225, June.
    2. Jos Mauricio Gil Le n & John William Rosso Murillo & Edgar Alonso Ramirez Hern ndez, 2019. "Public Debt and Stability in Economic Growth: Evidence for Latin America," International Journal of Economics and Financial Issues, Econjournals, vol. 9(4), pages 137-147.
    3. D'Andrea, Sara, 2022. "A Meta-Analysis on the Debt-Growth Relationship," MPRA Paper 114409, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    2. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    3. Joseph Kwadwo Tuffour & Thelma Mensah, 2018. "The Effects of Governance Type and Economic Crises on Foreign Direct Investment Inflows in Ghana," Foreign Trade Review, , vol. 53(2), pages 63-80, May.
    4. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    5. Fakhri J. Hasanov & Jeyhun I. Mikayilov & Sabuhi Yusifov & Khatai Aliyev & Samra Talishinskaya, 2019. "The role of social and physical infrastructure spending in tradable and non-tradable growth," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(1), March.
    6. Syed Ammad & Qazi Masood Ahmed, 2014. "Dynamic Effects of Energy Sector Public Investment on Sectoral Economic Growth: Experience from Pakistan Economy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 53(4), pages 403-421.
    7. Shahrzad Ghourchian & Hakan Yilmazkuday, 2020. "Government consumption, government debt and economic growth," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 589-605, May.
    8. Wafa Ghardallou & Abdelkader Boudriga, 2014. "Financial Development and Democracy: is the Relationship Non-Linear?," Working Papers 886, Economic Research Forum, revised Dec 2014.
    9. Ibrar Hussain & Zahoor Khan & Muhmmad Rafiq, 2017. "Compositional Changes in Public Expenditure and Economic Growth: Time Series Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 1-20, March.
    10. Asafo-Agyei, George & Kodongo, Odongo, 2022. "Foreign direct investment and economic growth in Sub-Saharan Africa: A nonlinear analysis," Economic Systems, Elsevier, vol. 46(4).
    11. Diego Enrique Pinilla Rodríguez & Juan de Dios Jiménez Aguilera & Roberto Montero Granados, 2013. "Gasto público y crecimiento económico. Un estudio empírico para América Latina," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, May.
    12. Seng Sothan, 2017. "Causality between foreign direct investment and economic growth for Cambodia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1277860-127, January.
    13. Khatai Aliyev & Bruce Dehning & Orkhan Nadirov, 2016. "Modelling the Impact of Fiscal Policy on Non-Oil Gdp in a Resource Rich Country: Evidence from Azerbaijan," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 1869-1878.
    14. Silvestro Sanzo & Mariano Bella & Giovanni Graziano, 2017. "Tax Structure and Economic Growth: A Panel Cointegrated VAR Analysis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(2), pages 239-253, July.
    15. Antonio Afonso & Hüseyin Sen & Ayse Kaya, 2021. "Government Size, Unemployment and Inflation Nexus in Eight Large Emerging Market Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 235(1), pages 133-170, March.
    16. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
    17. Leta, M. & Zemedkun, L., 2018. "Long Run Relationship Between Economic Growth, Export, Population And Investment Of Ethiopia," International Journal of Agricultural Research, Innovation and Technology (IJARIT), IJARIT Research Foundation, vol. 8(2), December.
    18. Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
    19. Andrea Bassanini & Stefano Scarpetta, 2003. "The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 9-56.
    20. Ali, Sharafat, 2014. "Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis," MPRA Paper 53706, University Library of Munich, Germany.

    More about this item

    Keywords

    Public Debt; Economic Growth; OLS; GMM;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2018-06-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.