Public Debt and Macroeconomic Stability among Sub-Saharan African countries: A System GMM Test Approach

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dc.contributor.authorSumba, Jerry Ogutu
dc.contributor.authorOchenge, Rogers
dc.contributor.authorMugambi, Paul
dc.contributor.authorMusafiri, Collins Muimi
dc.date.accessioned2024-04-12T12:28:41Z
dc.date.available2024-04-12T12:28:41Z
dc.date.issued2024-02
dc.descriptionArticleen_US
dc.description.abstractThis study examined the effect of public debt on macroeconomic stability among 45 sub-Saharan African (SSA) countries for the period 2005–2022 using the two-step system Generalized Method of Moments (GMM). The study disaggregated public debt into domestic and foreign borrowing and determined the effect of each on inflation and economic growth. In agreement with recent studies, we found compelling evidence of negative effect of both domestic and foreign borrowing on economic growth and a positive effect on inflation among SSA countries. The empirical results reveal that a unit increase in domestic borrowing reduces economic growth by 0.06 percent and raises inflation by about 0.14 percent, while the same increase in foreign borrowing reduces economic growth by 0.01 percent and increases inflation by 0.05 percent holding other factors constant. These results imply that increase in public debt causes macroeconomic instability, and that domestic borrowing has a relatively larger impact on macroeconomic variables compared to foreign borrowing. The policy implication of the current study is that SSA countries should avoid excessive borrowing by operating a fiscal deficit within individual country threshold limits to contain growth in public debt. The SSA countries should also ensure borrowed funds are channeled into projects that bring revenue and other investment opportunities to amortize the debt stock.en_US
dc.identifier.citationSumba, J. O., Ochenge, R., Mugambi, P., & Musafiri, C. M. (2024). Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach. Cogent Economics & Finance, 12(1), 2326451.en_US
dc.identifier.urihttps://doi.org/10.1080/23322039.2024.2326451
dc.identifier.urihttps://ir-library.ku.ac.ke/handle/123456789/27815
dc.language.isoenen_US
dc.publisherCogent Economics & Financeen_US
dc.subjectPublic debten_US
dc.subjecteconomic growthen_US
dc.subjectinflation rateen_US
dc.subjectmacroeconomicen_US
dc.subjectdomestic borrowingen_US
dc.subjectforeign borrowingen_US
dc.subjectsystem GMMen_US
dc.titlePublic Debt and Macroeconomic Stability among Sub-Saharan African countries: A System GMM Test Approachen_US
dc.typeArticleen_US
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