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Public Debt and Economic Growth: Evidence From Africa

Emmanuel Yeboah Lartey, Alhassan Musah, Bismark Okyere and Abdul-Nasir Yusif
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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

International Journal of Economics and Financial Issues, 2018, vol. 8, issue 6, 35-45

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.

Keywords: Public Debt; Economic Growth; OLS; GMM (search for similar items in EconPapers)
JEL-codes: F33 F34 F35 O11 (search for similar items in EconPapers)
Date: 2018
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