Public Debt and Economic Growth in Emerging Market Economies

Bökemeier, Bettina; Greiner, Alfred

doi:10.2139/ssrn.2449222

Cited by 14 publications

(18 citation statements)

References 14 publications

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“…Human capital is widely recognized as an important factor that promotes economic growth [11]. This is depicted in the seminal contribution from human capital theory of Schultz [12], Welch [13], Mincer, [14] and Becker [15].…”

Section: Literature Reviewmentioning

confidence: 99%

“…This study distinguishes itself from the previous studies in Kenya by adopting modified Granger Causality techniques and Autoregressive Distributed Lag Model (ARDL) [11,12]. The ARDL model was chosen because first it allows the use of OLS to estimate the cointegration equations as long as the number of lags in the model has been identified.…”

Section: Estimation Techniquementioning

confidence: 99%

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Effect of Public Spending on Economic Growth in Kenya

Mukui

Awiti

Onjala

2019

JEMT

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This study aimed at examining the relationship between public spending and economic growth and how the composition of government expenditure affects economic growth in Kenya using time series data from 1980 to 2014. To achieve the objectives, modified Granger causality and Autoregressive Distributed Lag model (ARDL) were used. The results revealed both short term and long term causality from economic growth to government expenditure but only short run causality from government expenditure to economic growth. Based on the economic classification, the long run ARDL regression results showed development expenditure promotes economic growth while government purchases have no significant effect on GDP. Other control variables such as inflation and unemployment had negative effect on economic growth. In terms of functional classification, the regression results showed that expenditure on education and infrastructure are important drivers of economic growth. The positive effect of health expenditure was not significant. Further, the regression results indicated that domestic savings and trade openness had significant positive effect on economic growth. Based on the empirical findings this study therefore recommends resources to be directed towards financing public infrastructure investment to improve economic performance. The study also recommends increasing resource allocation in the education sector to improve efficiency and support skills and human capital development that are important in promoting economic growth through increases in labor productivity. The study also recommends policymakers to enhance domestic resource mobilization and pursue favorable trade policies aimed at fostering robust economic growth.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Estimation Techniquementioning

confidence: 99%

Effect of Public Spending on Economic Growth in Kenya

Mukui

Awiti

Onjala

2019

JEMT

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“…4. Other literature such as Fincke and Greiner (2014) found a positive relation between debt and growth in EMs and denoted that this could be because of the specifics of these economies characterized by surging growth rates and thus an expanding public sector. For more empirical evidence, see Reinhart and Rogoff (2010), Kumar and Woo (2010), Fincke and Greiner (2015) and Pattillo et al (2004Pattillo et al ( , 2002.…”

Section: Reps 61mentioning

confidence: 96%

External debt vulnerability in emerging markets and developing economies during the COVID-19 shock

El-Khishin

Mohieldin

2021

REPS

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Purpose This paper aims to assess to what extent the COVID-19 shock is expected to create a debt crisis in emerging markets and developing economies (EMDEs) through two main questions: what are the main determinants of EMDEs external vulnerability? How vulnerable are EMDEs to the current COVID-19 shock compared to the global financial crisis (GFC)? Design/methodology/approach In addition to a descriptive analysis of the determinants of EMDEs external vulnerability, this paper designs two sub-indices of overindebtedness and financial fragility that capture EMDEs’ distinct characteristics. The two sub-indices together illustrate the overall external vulnerability to the current shock. Findings EMDEs are more vulnerable compared to the GFC era. Current debt threats arise mainly from debt architecture and the domination of volatile debt forms – primarily foreign currency-denominated bonds. Excessive fear of debt-deflation spirals after the GFC prompted EMDEs to expand their growth trajectories through a pattern of cheap private lending, loose measures and unmonitored fiscal expansion. Research limitations/implications Conclusive post-crisis data are still unavailable. Practical implications EMDEs need to balance between temporary accommodative measures and a post-shock policy mix that prevent a deflation spiral without worsening indebtedness and financial fragility. Moreover, financial prudence in face of growing credit demand is crucial, particularly in light of the monetary expansion and injected liquidity. Originality/value The indices offer a framework for examining external vulnerability in EMDEs based on theoretical and historical revisions, IMF benchmarks and EMDEs specific debt characteristics. The indices components can be offered for empirical examination in separate future research once conclusive data become available.

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“…They also find that the quality of domestic debt (whether it is in marketable securities, positive real interest rates and debt issued to the non‐bank sector) matters a great deal towards its impact on growth. Other notable studies reporting positive effects are Égert () and Fincke and Greiner ().…”

Section: The Debt and Growth Literaturementioning

confidence: 96%

Unbundled debt and economic growth in developed and developing economies: An empirical analysis

2018

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We unbundle the effect of debt on economic growth using a new panel data set sourced from Vague (2014, The next economic disaster: Why it's coming and how to avoid it. Philadelphia, PA: University of Pennsylvania Press) for 48 countries over the period 1961–2015. We distinguish between public, private, household and nonfinancial corporation (NFC) debt. We use the panel vector autoregressive approach, Granger causality tests and impulse response to establish causality. We also test the heterogeneity in the debt–growth relationship across developed and developing countries. In our full sample of countries, all types of debt appear to be harmful to economic growth. The negative effect of public debt appears to be uniform across developed and developing countries, although the impact is much stronger on developed countries. Household debt appears to be expansionary in developing countries whereas contractionary in developed countries. Nonfinancial corporation debt appears to have no impact on developing countries but negative impact on developed countries. Finally, total debt (i.e., the sum of public, household and NFC debt) has a negative impact on growth in developed countries, but no impact is detected in the case of developing countries.

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Public Debt and Economic Growth in Emerging Market Economies

Cited by 14 publications

References 14 publications

Effect of Public Spending on Economic Growth in Kenya

Effect of Public Spending on Economic Growth in Kenya

External debt vulnerability in emerging markets and developing economies during the COVID-19 shock

Unbundled debt and economic growth in developed and developing economies: An empirical analysis

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