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Is public debt harmful towards economic growth? New evidence from South Africa

Author

Listed:
  • N. Mhlaba
  • A. Phiri

Abstract

The issue of whether public debt is useful or harmful towards economic growth is one of the most prevailing debates in the literature with no consensus existing on the subject matter. The study employs the ARDL model to examine the long-run and short-run effects of public debt on economic growth for South African data spanning a period between 2002:q1 and 2016:q4. Our sensitivity analysis consists of re-estimating our empirical regressions using two sub-samples dataset corresponding to the post-crisis period (i.e. 2007:q3–2016:q4). All estimated regressions unanimously find negative debt–growth relationship, with the negative relationship strengthening in the post-crisis period. Overall, our empirical results have some useful ramifications towards fiscal policymakers.

Suggested Citation

  • N. Mhlaba & A. Phiri, 2019. "Is public debt harmful towards economic growth? New evidence from South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1603653-160, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1603653
    DOI: 10.1080/23322039.2019.1603653
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    Citations

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    Cited by:

    1. Hylton Hollander, 2024. "Debt-financed fiscal stimulus in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 48(1), pages 87-112, January.
    2. Ahmed Oluwatobi Adekunle, 2022. "The Debt-Growth Nexus in Nigeria: An Empirical Evidence," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 155-161, November.
    3. Nkosinathi Emmanuel Monamodi & Sibongile Goliath, 2024. "An Empirical Examination Of South Africa'S Public Debteconomic Growth Nexus: The Emergence Of Classical Economists’ Ideology," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 12(2), pages 64-82.
    4. Stoyan Tanchev & Naftaly Mose, 2023. "Fiscal Policy and Economic Growth: Evidence from European Union Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 19-36.
    5. Chowdhury, Mohammad Ashraful Ferdous & Prince, Ehsanur Rauf & Shoyeb, Mohammad & Abdullah, Mohammad, 2024. "The threshold effect of institutional quality on sovereign debt and economic stability," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 39-59.
    6. Saungweme, Talknice & Odhiambo, Nicholas M, 2019. "Relative impact of domestic and foreign public debt on economic growth in South Africa," Working Papers 25664, University of South Africa, Department of Economics.
    7. repec:bcp:journl:v:7:y:2023:i:3:p:705-718 is not listed on IDEAS
    8. Pratibha Saini & Krishna Muniyoor, 2021. "Revisiting The Debt–Growth Nexus: Evidence From India," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 66(231), pages 151-172, October –.
    9. Anselm Komla Abotsi & Isaac Kwesi Ampah, 2024. "Public Debt and Economic Growth in Africa in the Pre-Covid Era: The Role of Control of Corruption," International Journal of Economics and Financial Issues, Econjournals, vol. 14(1), pages 144-153, January.
    10. Abdulkarim Yusuf & Saidatulakmal Mohd, 2024. "Investigating the Asymmetric Impact of Public Debt on Economic Growth in Nigeria," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 9452-9481, June.
    11. Pratibha S. & Krishna Muniyoor, 2025. "India’s Debt Dilemma: Investigating Threshold, Primary Surplus, and Institutional Quality," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 24(4), pages 439-460, December.
    12. Charles O Manasseh & Felicia C Abada & Ebelechukwu L Okiche & Ogochukwu Okanya & Ifeoma C Nwakoby & Peter Offu & Anuli R Ogbuagu & Chiedozie O Okafor & Paul C Obidike & Nnenna G Nwonye, 2022. "External debt and economic growth in Sub-Saharan Africa: Does governance matter?," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-28, March.
    13. Adebayo Aderounmu Ogunoye & Dayo Benedict Olanipekun, 2025. "External Debt and Ugandan Economy: A Vector Error Correction Mechanism," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(5), pages 2395-2406, May.
    14. Theshne Kisten, 2023. "Macro-financial implications of public debt in South Africa: The role of financial regimes," WIDER Working Paper Series wp-2023-76, World Institute for Development Economic Research (UNU-WIDER).
    15. Ramos Emmanuel Mabugu & Nyiko Worship Hlongwane, 2025. "Modelling South Africa’s Economic Transformation and Growth: A Prospective and Retrospective Analysis," Economies, MDPI, vol. 13(7), pages 1-23, July.
    16. TOGBENU, Fo-kossi Edem & Kadanga, Mayo Takémsi Norris, 2024. "Un réexamen de l’effet de seuil de la dette publique sur la croissance économique en Afrique subsaharienne [A reevaluation of the threshold effect of public debt on economic growth in Sub-Saharan Africa]," MPRA Paper 120429, University Library of Munich, Germany.
    17. Nsirimovu, Okwuwada, 2023. "Reflecting on the appetite for borrowing and the volatility of crude prices for rapid post-COVID economic recovery initiatives in Nigeria: Implications for Per capita income using a Dynamic ARDL simulation approach," MPRA Paper 119532, University Library of Munich, Germany, revised 20 Dec 2023.
    18. Rudra P. Pradhan & Mak B. Arvin & Mahendhiran Nair & John H. Hall, 2022. "Public Debt, Economic Openness, And Sustainable Economic Growth in Europe: A Dynamic Panel Causal Analysis," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(1), pages 167-183.
    19. Nouhaila Zeroual & Mohammed Rachid Aasri, 2025. "Public Debt: Facilitator or barrier? A literature review of its impact on economic growth [Dette publique : facilitateur ou obstacle ? Une revue de la littérature sur son impact sur la croissance économique]," Post-Print hal-05248805, HAL.
    20. Attard, Juergen, 2019. "Public Debt and Economic Growth nexus: A Dynamic Panel ARDL approach," MPRA Paper 96023, University Library of Munich, Germany.
    21. repec:bcp:journl:v:7:y:2023:i:3:p:484-494 is not listed on IDEAS
    22. Okere, Kingsley Ikechukwu & Dimnwobi, Stephen Kelechi & Ekesiobi, Chukwunonso & Onuoha, Favour Chidinma, 2023. "Turning the tide on energy poverty in sub-Saharan Africa: Does public debt matter?," Energy, Elsevier, vol. 282(C).
    23. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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