PUBLIC DEBT SUSTAINABILITY IN THE WEST AFRICAN MONETARY ZONE
Ngozi E. Egbuna,
Santigie M. Kargbo (),
Sani Bawa (),
Ibrahima Diallo (),
Olukayode S. Odeniran,
Eric Sambola and
No 17, Working Papers from West African Monetary Institute
WAMZ countries have accumulated high levels of public debt less than two decades after the massive debt forgiveness effected under the Highly Indebted Poor Countries (HIPC) initiative. This has raised sustainability concerns as rising debt levels have the potential to create negative spillover effects and derail the macroeconomic convergence process in the Zone. This study examines the response of WAMZ countries to increases in public debt levels. Utilizing pooled OLS and panel fixed effects (FE) on annual data covering the period 2000 â€“ 2018, the study shows positive response of primary balance to changes in the debt to GDP ratio across WAMZ countries, indicating that public debt were sustainable during the period. Results from the Panel Smooth Transition Regression (PSTR) model indicate significant positive non-linear response of primary balance to increases in the debt ratio below a threshold debt-to-GDP ratio of 90 percent. The study recommends the continuation of fiscal consolidation efforts aimed at enhancing revenue and rationalizing unproductive expenditures in all Member States.
Keywords: Public debt; primary balance; Panel Smooth Transition Regression; WAMZ (search for similar items in EconPapers)
JEL-codes: C33 H62 H63 (search for similar items in EconPapers)
Pages: 36 pages
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