Empirical Investigation of External Debt-Growth Nexus in Sub-Saharan Africa

Abstract

The long run debt-growth nexus in sub-Saharan Africa is the main focus of this study. Its analysis is conducted on the basis of theoretical discussions and data considerations. The study employs both panel autoregressive distributed lag (PARDL) model and panel non-linear autoregressive distributed lag (PNARDL) model to examine the relationship between external debt and economic growth using a panel dataset of 22 countries from 1985 to 2015. Its results find that the level of investment significantly influences the long-run economic growth in both linear and non-linear models. However, the long-run coefficient of external debt is only significant in the non-linear model. There is strong evidence of error correction as the lagged GDP per capita is highly significant and negative in the two models.

Key Words: debt, debt and growth, public debt and growth, linear regression models