General Government Debt and
Growth in Sadc Countries Cover Image

General Government Debt and Growth in Sadc Countries
General Government Debt and Growth in Sadc Countries

Author(s): Mduduzi Biyase
Subject(s): National Economy
Published by: Editura Universitară Danubius
Keywords: Government Debt; Economic Growth; SADC; Fixed Effect;

Summary/Abstract: This study empirically investigates the relationship between government debt and economic growth in a sample of 10 Southern African Development Community (SADC) members from 1995 to 2017. The study disaggregates the SADC data into different samples: full sample and a sample of non-Heavily Indebted Poor Countries and employs the fixed effects two-stage least squares (FE-2SLS) estimator to account for possible endogeneity bias due to reverse causation between government debt and economic growth. Results are presented for the entire sample and sub-sample (non-Heavily Indebted Poor Countries). While the impacts of government debt are similar in direction (negatively related to economic growth) for the full and sub-sample, it is not significantly related with economic growth in the sub-sample. That is, the estimated coefficient varies substantially, depending on the particular sample of countries chosen. This implies that government debt, at moderate level, has no impact on growth while after a certain threshold the effects become growth reducing. Inflation, military expenditure and trade openness were also found to have a negative significant relationship with government debt in SADC. However, population growth and investment were found to have a significant positive relationship with government debt.

  • Issue Year: 38/2019
  • Issue No: 2
  • Page Range: 57-68
  • Page Count: 12
  • Language: English