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Debt-financed public investment in developing countries: Does the efficiency of public investment matter?

Amarachukwu Anthony Anyanwu
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Amarachukwu Anthony Anyanwu: Lincoln University, New Zealand

Theoretical and Applied Economics, 2021, vol. XXII(2021), issue 1(626), Spring, 259-272

Abstract: Public investment is central to implementing the UN 2030 Agenda for Sustainable Development – but persistent levels of high public debt without sufficient debt-servicing capacity poses serious risks. This study examines whether government spending efficiency is associated with differential effects of public investment on debt-to-GDP ratio for a panel data consisting of 16 developing countries in Asia-Pacific region over the period 2007-2017. The empirical results indicate that public investment efficiency moderates debt-to-GDP ratio whereas public investment in the midst of public sector corruption accentuates debt-to-GDP ratio. The results have important policy implications.

Keywords: public debt; government spending efficiency; public investment; public sector corruption. (search for similar items in EconPapers)
Date: 2021
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