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This study aims to test the dynamic impact of public debt and economic growth on newly democratized African countries (South Africa and Namibia) and compare the findings with those of newly democratized European countries (Germany and Ukraine) during the period 1990–2022.

The methodology involves three stages: identifying the appropriate transition variable, assessing the linearity between public debt and economic growth and selecting the order m of the transition function. The linearity test helps identify the nature of relationships between public debt and economic growth. The wild cluster bootstrap-Lagrange Multiplier test is used to evaluate the model’s appropriateness. All these tests would be executed using the Lagrange Multiplier type of test.

The results signify the policy switch, as the authors find that the relationship between public debt and economic growth is characterized by two transitions that symbolize that the current stage of the relationship is beyond the U-shape; however, an S-shape. The results show that for newly democratized African countries, the threshold during the first waves was 50% of GDP, represented by a U-shape, which then transits to an inverted U-shape with a threshold of 65% of GDP. Then, for the European case, it was 60% of GDP, which is now 72% of GDP.

The findings suggest that an escalating level of public debt has a negative impact on economic growth; therefore, it is important to implement fiscal discipline, prioritize government spending and reduce reliance on debt financing. This can be achieved by focusing on revenue generation, implementing effective taxation policies, reducing wasteful expenditures and promoting investment and productivity-enhancing measures.

It is important to consider economic and political factors when designing the tax mix and setting the level of corporate taxation. Increasing corporate taxation can be seen as an inefficient way to raise revenue for the state, as it can have a negative impact on investment and the competitiveness of firms. However, lowering corporate taxation can encourage investment and job creation, but it can also be perceived as supporting large corporations. The aim of this chapter is to evaluate corporate taxation, its position in the tax mix and its potential impact on economic growth. The revenues of corporate income tax (CIT) have an increasing tendency even though the tax rate was reduced from 41% to 19%. Revenues are influenced by both legislative changes and economic cycles. The level of taxation is also influenced by deductions, which include asset depreciations, research and development expenses, or loss deductions. The Pearson Correlation Coefficient was used to examine the correlation between the selected factors. A moderately strong positive correlation was found between GDP growth and CIT as a percentage of total taxes, as well as between GDP growth and CIT as a percentage of GDP.

This paper seeks to explore the sensitivity of these parameters and their impact on fiscal policy outcomes. We use the existing literature to establish possible ranges for each parameter, and we examine how changes within these ranges can alter the outcomes of fiscal policy. In this way, we aim to highlight the importance of these parameters in the formulation and evaluation of fiscal policy.

The role of fiscal policy, its effects and multipliers continues to be a subject of intense debate in macroeconomics. Despite adopting a New Keynesian approach within a macroeconomic model, the reactions of macroeconomic variables to fiscal shocks can vary across different contexts and theoretical frameworks. This paper aims to investigate these diverse reactions by conducting a sensitivity analysis of parameters. Specifically, the study examines how key variables respond to fiscal shocks under different parameter settings. By analyzing the behavioral dynamics of these variables, this research contributes to the ongoing discussion on fiscal policy. The findings offer valuable insights to enrich the understanding of the complex relationship between fiscal shocks and macroeconomic outcomes, thus facilitating informed policy debates.

This paper aims to investigate key elements of New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. The focus is on the calibration of parameters and their impact on macroeconomic variables, such as output and inflation. The study also examines how different parameter settings affect the response of monetary policy to fiscal measures. In conclusion, this study has relied on theoretical exploration and a comprehensive review of existing literature. The parameters and their relationships have been analyzed within a robust theoretical framework, offering valuable insights for further research on how these factors influence model forecasts and inform policy recommendations derived from New Keynesian DSGE models. Moving forward, it is recommended that future work includes empirical analyses to test the reliability and effectiveness of parameter calibrations in real-world conditions. This will contribute to enhancing the accuracy and relevance of DSGE models for economic policy decision-making.

This study is motivated by the aim to provide a deeper understanding of the roles macroeconomic model parameters play concerning responses to expansionary fiscal policies and the subsequent reactions of monetary authorities. Comprehensive reviews that encompass this breadth of relationships within a single text are rare in the literature, making this work a valuable contribution to stimulating discussions on macroeconomic policies.

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.

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.

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%.

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.