Revisiting the debt–growth nexus in sub-Saharan Africa: fresh evidence from panel nonlinear ARDL approach
Abstract
Purpose
While some countries have used debt to drive economic growth, the asymmetric effect on sub-Saharan African (SSA) countries has received little attention in the empirical literature. This paper therefore examines the asymmetric effect of external debts on economic growth.
Design/methodology/approach
The panel nonlinear autoregressive distributed lag (NARDL) approach was employed in the study for 29 sub-Saharan African countries from 1990 to 2021. The cross-sectional dependence test was used to determine the presence of cross-sectional dependence, while the second-generation panel unit root tests was used to examine the unit-root properties.
Findings
The empirical results show that external debt has an asymmetric effect on economic growth in both the short and long run. In the long run, a positive shock in external debts of 1% triggers an upturn in economic growth by 0.216% while a negative shock triggers 0.354% decline in economic growth. This implies that the negative shock of external debts has a much stronger impact on economic growth than the positive shock. In the short run, a positive shock in external debts by 1% triggers a decline in economic growth by 0.641%, while a negative shock of 1% triggers a fall in economic growth of 0.170%.
Originality/value
The paper used the NARDL model to examine the asymmetric impact of external debt on the economic growth of SSA countries, which has not been extensively studied. It is recommended that governments in the selected countries in sub-Saharan Africa should drive economic growth by promoting domestic revenue mobilization since external debts impede economic growth.
Keywords
Acknowledgements
The authors express their gratitude to Dr Sabri Boubaker, the subject editor, Dr Ilan Alon, the editor in chief and the three anonymous reviewers for taking the time to read their work and provide insightful criticism that has shaped their work in its revised form.
Citation
Amoh, J.K., Abdul-Mumuni, A. and Amankwa Fosu, R. (2024), "Revisiting the debt–growth nexus in sub-Saharan Africa: fresh evidence from panel nonlinear ARDL approach", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-04-2023-0598
Publisher
:Emerald Publishing Limited
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