External Debt and Economic Growth Nexus in the Ecowas: A Threshold Analysis

Tarawalie, Abu Bakarr; Jalloh, Talatu

doi:10.11648/j.ijber.20211005.13

Cited by 7 publications

(7 citation statements)

References 22 publications

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“…To achieve the objective of this study in establishing the threshold level of external debt and its impact on economic growth, the empirical model draws largely from the research work of [1]. However, a major departure from is that the current study utilizes country-specific annual time series data.…”

Section: Methodsmentioning

confidence: 99%

“…However, a major departure from is that the current study utilizes country-specific annual time series data. The specification of the model and choice of variables is premised on theoretical underpinning and empirical debate on the external debt-growth nexus, and the structure of the Sierra Leone economy [1]. The specification of the linear model that establishes the link between external debt is given as follows.…”

Section: Methodsmentioning

confidence: 99%

“…Investigates the impact of external debt on economic growth for 15 ECOWAS countries, and determines the optimal threshold level of external debt that promotes growth [1]. The study employs a combination of the Pooled Ordinary Least Squares (POLS), Fixed Effect Model (FEM), Random Effect Model (REM) and Panel Corrected Standard Errors (PCSE) estimation techniques with data from 2000 to 2019.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The dependence on external debt by developing economies resonates mainly due to the failure of governments in these countries to finance much required expenditure programmes through domestic resource mobilization and domestic savings. Most developing countries are epitomized by low revenue mobilization, large savingsinvestment gap, chronic fiscal deficit, large current account deficit and high inflation [1]. As a result, there are limited resources to finance basic infrastructure projects, which compel developing economies to borrow in order to finance social and economic infrastructure, stimulate economic activities, boost growth and development.…”

Section: Introductionmentioning

confidence: 99%

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External Debt and Economic Growth in Sierra Leone: A Threshold Analysis

Tarawalie,

Mbayoh

2024

J Bus Econo Stud

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The main focus of this study is to investigate the impact of external debt on economic growth and determine the threshold level of external debt that is favourable for economic growth in Sierra Leone, within the framework of a non-linear model (quadratic function). The study employs the Ordinary Least Squares estimation technique with annual time series data for the period 1980 to 2022. The empirical findings reveal that, lagged GDP, external debt, external debt squared and investment are the main drivers of economic growth in Sierra Leone. Specifically, the result reveals that external debt, investment and lagged GDP have a positive impact on growth whilst, external debt squared has a harmful impact on growth. Furthermore, the study establishes a nonlinear relationship between external debt and economic growth. The result indicates that the optimal threshold level of external debt (as a % of GDP) in Sierra Leone is 115%. The findings reveal that, external debt below the threshold level is growth enhancing. However, the accumulation of external debt beyond the threshold level of 115% is detrimental to growth. The diagnostic result confirms that about 76% of the variation in economic growth is explained by the regressors (independent variables). Also, the granger causality test result suggests a unidirectional causality from external debt to economic growth with no reverse causality, indicating that external debt granger caused economic growth at the 5% level. Based on the findings, the study recommends that, government should develop a robust debt management policy, to keep debt levels within sustainable limits and also cultivate an economic culture of transparency, on the issue of debt management and contract negotiations.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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External Debt and Economic Growth in Sierra Leone: A Threshold Analysis

Tarawalie,

Mbayoh

2024

J Bus Econo Stud

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“…The empirical findings indicate the existence of information from inflation to inflation uncertainty using the GARCH model, while from inflation uncertainty to inflation there exists no information except for two countries, Gambia and Burkina Faso. Tarawalie and Jalloh (2021) that seven macroeconomic outcomes negatively respond to fragility. The study equally notes that fragility is major source of economic shocks in the region's economy.…”

Section: Macroeconomic Policy Uncertaintymentioning

confidence: 99%

Macroeconomic Policy Coordination and Economic Growth Uncertainty in West Africa

Ugwu,

Ehinomen

2024

Folia Oeconomica Stetinensia

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Research background Understanding the rationale for macroeconomic policy coordination with the aim of achieving greater policy credibility and effectiveness in West Africa still remains the subject of debate. Purpose This study evaluates the effect of macroeconomic policy coordination on economic growth uncertainty in West Africa, utilizing a panel data set of the 15 member states from 1980 to 2020. Research methodology The study employed Pedroni’s cointegration test procedure and the Generalized Linear Model, fixed effect procedure for evaluation. Results The stationarity test results show that the variables are stationary at first difference at the 5% significant level, for the common and individual effect tests respectively. The cross section dependence test result indicates that there exists a cross-sectional independence for the variables under consideration. Pedroni’s cointegration test results indicate that there exists a long run relationship between economic growth uncertainty and macroeconomic policy variables. The fixed effect model result shows that monetary policy variable, inflation (INF) affect growth uncertainty negatively. The fiscal policy variable, government debts (DEBTS) indicates a positive sign to growth uncertainty and is significant statistically. The coefficient of the regional trade variable, (TRADE) and exchange rate indicate positive signs and are insignificant statistically. Novelty It is important to ascertain how uncertainty affect policy coordination gains. Thus this study has utilized the econometric models approach to evaluate the effect of policy decisions as economies encounter exogenous policy shocks in the face of uncertainty, in order to ascertain if coordination is preferred to individual policy decisions.

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