Dynamic Relations Between Public External Debt and Economic Growth in African Countries: A Curse or Blessing?
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This paper used the Johansen Cointegration test and system Generalised Method of
Moments (sysGMM) to examine the dynamic relations between external debt and economic growth
in 43 African countries over the period 2001–2018. The study used data fromWorld Development
Indicators (WDI) as published by the World Bank and the World Economic Outlook database as
provided by the International Monetary Finance (IMF). The study provides an understanding of
how the importance of external debt could be short-lived due to its misapplication. The result
reveals evidence to support a long-run equilibrium relationship between external debt and economic
growth in Africa. The result demonstrates that beyond a specific capacity, the short-run converges to
equilibrium in the long-run and external debt would start to have a deteriorating impact on economic
growth in Africa. The findings of this study reinforce the need for policymakers to ensure proper
application of external debt on economic activities that would lead to sustained long-term economic
performance. Moreover, the government and development partners must put in place a monitoring
mechanism to ensure the e�cient use of borrowed funds.
Keywords
HG Finance