This study aims at examining the debt threshold effects on economic growth in Africa. Non-dynamic and dynamic panel threshold regression approaches are used. The findings indicate that the estimated debt threshold is sensitive to the estimation technique used and to growth control variables included in the estimation. Existence of nonlinearities in the debt-growth nexus cannot be denied. The findings show that while low debt is neutral or growth-enhancing, high debt is consistently detrimental to growth for all the cases considered. This study shows that caution is needed when suggesting a debt threshold since this can be sensitive to modelling choice and to growth control variables. Nonlinearities in the debt-growth nexus are established but further analysis is needed to suggest a policy.

PurposeThe purpose of this study is to seek to re-examine the threshold effects of public debt on economic growth in Africa.Design/methodology/approachThis study applies panel smooth transition regression approach advanced by González et al. (2017). The method allows for both heterogeneity as well as a smooth change of regression coefficients from one regime to another.FindingsA debt threshold in the range of 62–66% is estimated for the whole sample. Low debt is found to be growth neutral but higher public debt is growth detrimental. For middle-income and resource-intensive countries, a debt threshold in the range of 58–63% is estimated. As part of robustness checks, a dynamic panel threshold model was also applied to deal with the endogeneity of debt, and a much higher debt threshold was estimated, at 74.3%. While low public debt is found to be either growth neutral or growth enhancing, high public debt is consistently detrimental to growth.Research limitations/implicationsThe findings of this study show that there is no single debt threshold applicable to all African countries, and confirm that the debt threshold level is sensitive to modeling choices. While further analysis is still needed to suggest a policy, the findings of this study show that high debt is detrimental to growth.Originality/valueThe novelty of this study is twofold. Contrary to previous studies on Africa, this study applies a different estimation technique which allows for heterogeneity and a smooth change of regression coefficients from one regime to another. Another novelty distinct from the previous studies is that, for robustness checks, this study divides the sample into low- and middle-income countries, and into resource- and nonresource intensive countries, as debt experience can differ among country groups. Further, as part of robustness checks, another estimation method is also applied in which the threshold variable (debt) is allowed to be endogenous.

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Purpose This study aims to undertake an institutional analysis of capital flight and examine the drivers of capital flight from Burundi. Design/methodology/approach Given the episodes of political instability and poor governance which have characterized Burundi’s landscape in the past decades, coupled with macroeconomic instability which has been prevailing, political, economic and institutional factors are used to explain the trend and magnitude of capital flight which were recorded. An econometric analysis using robust least squares is also used to examine the determinants of capital flight from Burundi. Findings The estimation results seem to be sensitive to capital flight measurement used, but in general, they suggest that external debt, political instability and wars, as well as exports, are the main drivers of capital flight from Burundi. Research limitations/implications The findings of this study imply that to discourage capital flight, the government of Burundi should promote peace and political stability. In addition, more responsibility, more transparency and accountability are required from the government of Burundi in managing resources from external debt. Moreover, some actions are needed to fight trade misinvoicing, which was seen to be a major channel of capital flight from Burundi. It is however to be acknowledged that our econometric analysis results might not be robust because of data limitations related to data availability on capital flight for only the period 1985-2013. Originality/value This study contributes to the existing capital flight literature in two ways. First, by undertaking the first ever country-specific study focusing on Burundi, and second, by undertaking an institutional analysis of capital flight to understand the political, economic and institutional issues behind capital flight from Burundi. The focus in this study is on Burundi because of the burden that capital flight imposes on the country already impoverished.