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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
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    References listed on IDEAS

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    Cited by:

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    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.

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    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

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