Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach
AbstractThis study examined the effect of public debt on macroeconomic stability among 45 sub-Saharan African (SSA) countries for the period 2005–2022 using the two-step system Generalized Method of Moments (GMM). The study disaggregated public debt into domestic and foreign borrowing and determined...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2024-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2024.2326451 |
| _version_ | 1797244336426975232 |
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| author | Jerry Ogutu Sumba Rogers Ochenge Paul Mugambi Collins Muimi Musafiri |
| author_facet | Jerry Ogutu Sumba Rogers Ochenge Paul Mugambi Collins Muimi Musafiri |
| author_sort | Jerry Ogutu Sumba |
| collection | DOAJ |
| description | AbstractThis study examined the effect of public debt on macroeconomic stability among 45 sub-Saharan African (SSA) countries for the period 2005–2022 using the two-step system Generalized Method of Moments (GMM). The study disaggregated public debt into domestic and foreign borrowing and determined the effect of each on inflation and economic growth. In agreement with recent studies, we found compelling evidence of negative effect of both domestic and foreign borrowing on economic growth and a positive effect on inflation among SSA countries. The empirical results reveal that a unit increase in domestic borrowing reduces economic growth by 0.06 percent and raises inflation by about 0.14 percent, while the same increase in foreign borrowing reduces economic growth by 0.01 percent and increases inflation by 0.05 percent holding other factors constant. These results imply that increase in public debt causes macroeconomic instability, and that domestic borrowing has a relatively larger impact on macroeconomic variables compared to foreign borrowing. The policy implication of the current study is that SSA countries should avoid excessive borrowing by operating a fiscal deficit within individual country threshold limits to contain growth in public debt. The SSA countries should also ensure borrowed funds are channeled into projects that bring revenue and other investment opportunities to amortize the debt stock. |
| first_indexed | 2024-04-24T19:09:23Z |
| format | Article |
| id | doaj.art-4c7414eb75bc4b1fbf0424c56cfa68c0 |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-04-24T19:09:23Z |
| publishDate | 2024-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-4c7414eb75bc4b1fbf0424c56cfa68c02024-03-26T12:38:41ZengTaylor & Francis GroupCogent Economics & Finance2332-20392024-12-0112110.1080/23322039.2024.2326451Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approachJerry Ogutu Sumba0Rogers Ochenge1Paul Mugambi2Collins Muimi Musafiri3Department of Economics, University of Embu, Embu, KenyaDepartment of Economics, Kenyatta University, Nairobi, KenyaDepartment of Economics, University of Embu, Embu, KenyaCortile Scientific Limited, Nairobi, KenyaAbstractThis study examined the effect of public debt on macroeconomic stability among 45 sub-Saharan African (SSA) countries for the period 2005–2022 using the two-step system Generalized Method of Moments (GMM). The study disaggregated public debt into domestic and foreign borrowing and determined the effect of each on inflation and economic growth. In agreement with recent studies, we found compelling evidence of negative effect of both domestic and foreign borrowing on economic growth and a positive effect on inflation among SSA countries. The empirical results reveal that a unit increase in domestic borrowing reduces economic growth by 0.06 percent and raises inflation by about 0.14 percent, while the same increase in foreign borrowing reduces economic growth by 0.01 percent and increases inflation by 0.05 percent holding other factors constant. These results imply that increase in public debt causes macroeconomic instability, and that domestic borrowing has a relatively larger impact on macroeconomic variables compared to foreign borrowing. The policy implication of the current study is that SSA countries should avoid excessive borrowing by operating a fiscal deficit within individual country threshold limits to contain growth in public debt. The SSA countries should also ensure borrowed funds are channeled into projects that bring revenue and other investment opportunities to amortize the debt stock.https://www.tandfonline.com/doi/10.1080/23322039.2024.2326451Public debteconomic growthinflation ratemacroeconomicdomestic borrowingforeign borrowing |
| spellingShingle | Jerry Ogutu Sumba Rogers Ochenge Paul Mugambi Collins Muimi Musafiri Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach Cogent Economics & Finance Public debt economic growth inflation rate macroeconomic domestic borrowing foreign borrowing |
| title | Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach |
| title_full | Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach |
| title_fullStr | Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach |
| title_full_unstemmed | Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach |
| title_short | Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach |
| title_sort | public debt and macroeconomic stability among sub saharan african countries a system gmm test approach |
| topic | Public debt economic growth inflation rate macroeconomic domestic borrowing foreign borrowing |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2024.2326451 |
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