Empirical Investigation of the Public Debt Non-Linear Effects on Economic Growth in Sub-Saharan African (SSA) Countries in a Context of Re-Indebtedness: the Case of Heavily Indebted Poor Countries

Abstract

This paper analyzes the non-linear effects of public debt on economic growth in heavily indebted poor countries of sub-Saharan Africa (SSA) in a context of re-indebtedness. The methodology adopted is based on a non-linear dynamic panel model with a threshold effect (First Difference Generalized Method of Moments (FD-GMM)). The period covered is from 2010 to 2019. The results after estimations reveal the existence of a threshold of 58,21% below which the stock of debt has a significant positive impact on economic growth and above which public debt has a significant negative impact on economic growth. In parallel to this first order result, we also find that variables such as trade openness and inflation improve economic growth below the critical debt threshold.(original abstract)