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Relative impact of domestic and foreign public debt on economic growth in South Africa

Talknice Saungweme and Nicholas Odhiambo ()

No 26641, Working Papers from University of South Africa, Department of Economics

Abstract: This paper investigates the debt-growth nexus by testing both the impact of aggregate public debt on economic growth, and the relative impact of domestic and foreign public debt on economic growth using South Africa as the case study ? from 1970 to 2017. Based on the autoregressive distributed lag (ARDL) technique, the findings reveal that the impact of aggregated public debt on economic growth in South Africa is statistically significant and negative, both in the short run and in the long run. The results further reveal that domestic public debt and economic growth have a statistically significant and positive relationship in the short run only. Furthermore, foreign public debt has a statistically significant and negative relationship with economic growth but only in the long run. Therefore, the study recommends the government to manage effectively its debt and to finance long-term high returning productive investments that should translate into economic growth. Finally, the study cautions the country against growing public debt, predominantly foreign debt, to finance its increasing recurrent expenditure needs.

Keywords: Public debt; domestic public debt; foreign public debt; economic growth; South Africa (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-fdg and nep-gro
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Working Paper: Relative impact of domestic and foreign public debt on economic growth in South Africa (2019) Downloads
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