Public debt-investment nexus: the significance of investment-generation policy in West Africa

Fagbemi, Fisayo; Adeosun, Opeoluwa Adeniyi

doi:10.1108/jeas-05-2020-0070

Cited by 4 publications

(4 citation statements)

References 51 publications

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“…Article DOI: 10.52589/AJAFR-LCLPU429 DOI URL: https://doi.org/10.52589/AJAFR-LCLPU429 www.abjournals.org Mutasa (2019), Nwaeze (2017) and Ncanywa and Masoga (2018) that also suggest that domestic debt and total debt impedes private investments in Nigeria. This means that the Nigerian government has been diverting borrowed funds, and disagrees with the findings of Ogunjimi (2019), Fagbemi and Adeosun (2020) and Thilanka and Sri Ranjith (2018) that domestic debt has positive or no significance on private investments in Nigeria.…”

Section: Table 6: Asymmetric Long-run Model Estimate Source: Authors'...mentioning

confidence: 58%

“…With the Vector Error Correction Model, the study found that Debt-Export Ratio confirms its expansionary effect on investment. Fagbemi and Adeosun (2020) examine the long run relationship and interconnections between public debt and domestic investment in 13 West African countries from 1986 to 2018 with Panel Dynamic Least Squares (DOLS) and Panel Fully Modified Least Squares (FMOLS), and found debts (% of GDP) have an insignificant effect on investment in the long run.…”

Section: Empirical Reviewmentioning

confidence: 99%

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Domestic and Foreign Debt Dynamics and Nonlinear Effects on Private Investments in Nigeria: Evidence with Asymmetric ARDL and Causality

O.S.¹,

Steve²,

Henry³

et al. 2023

African Journal of Accounting and Financial Research

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The ultimate goal of the study was to determine the asymmetric and dynamic effects of public debt on private investment in Nigeria from 1990 to 2019. Because of the nature of data stationarity, the study then adopted the Nonlinear Autoregressive Distributed Lag (NARDL) modelling technique, which can produce both long-run and short-run parameter estimates of negative and positive decomposed values of domestic and foreign investment. The study used the Augmented Dickey-Fuller (ADF) test to ascertain the true order of integration for the study variables. The findings for the NARDL model showed a stable long-run cointegration among private investment, domestic debt, foreign debt, economic growth, inflation and real exchange rate for the study period. The results show an asymmetric relationship between domestic and foreign debts and private investments in the long run. The estimated results further show that private investment is a significant positive function of positive and negative changes in foreign debt, and a significant negative function of positive and negative changes in domestic debt in the long run, while there were significant instant positive s on impacts on domestic and foreign debt shocks in the short-run.

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Section: Table 6: Asymmetric Long-run Model Estimate Source: Authors'...mentioning

confidence: 58%

Section: Empirical Reviewmentioning

confidence: 99%

Domestic and Foreign Debt Dynamics and Nonlinear Effects on Private Investments in Nigeria: Evidence with Asymmetric ARDL and Causality

O.S.¹,

Steve²,

Henry³

et al. 2023

African Journal of Accounting and Financial Research

View full text Add to dashboard Cite

show abstract

“…Countries often make use of reserve currency to manage liquidity in order to use it for better control of inflation; this means more money chasing fewer goods. To control inflation, foreign countries purchase their own currency, leading to decreases in the money supply; consequently, it makes the local currency worth more (Fagbemi & Adeosun, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…The assertion has prompted the necessary involvement of the government to rescue the nation through the provision of the needed huge capital flow necessary for large-scale production in substantial industries and for the delivery of other infrastructure (Imimole et al, 2014;Fagbemi & Adeosun, 2020). The need to borrow by the government, from external or domestic forces, could be traced to neoclassical growth model, which states that capital scarce countries, which are usually developing nations, need borrowing to overcome the capital accumulation problem, thereby increasing their capital to achieve a steady level of state and reasonable GDP per capita income (Abubakar, 2010;Babatunde et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Relationship between Public Debt and Exports in Nigeria: A Granger Causality and Threshold Analysis Approach

M.A.¹,

O.T.²,

A.A.³

et al. 2022

African Journal of Social Sciences and Humanities Research

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This paper examines the relationship between public debt and exports of Nigeria, ranging from the period 1981 to 2017. It analyses the trend of public debt and its measure of sustainability and how it relates to the export earnings of Nigeria. Granger causality was used to test the causality effect of public debts on Nigeria's exports (oil and non-oil exports). Also, threshold regression analysis was used to investigate the relationship between public debt and exports of Nigeria. Granger causality results show that the export of goods and services of Nigeria granger causes external debt while external debt does not granger cause the export of goods and services. Domestic debt has a statistically significant influence on exports of Nigeria, but a threshold exists for this to avoid the crowding-out effect and higher interest rate, which will influence exports negatively. Hence, for Nigeria as a nation to maintain the sustainability of its domestic debt in relation to exports, there is an existence of a maximum threshold limit of ₦6,538 billion, while external debt should be below ₦3,178 billion.

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The impact of debt service costs and public debt on private capital formation in South Africa

Zhou

2021

AJEMS

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PurposeThe aim of this paper is to analyse the relationship between public debt, corporate debt service costs and private capital formation in South Africa.Design/methodology/approachTo capture the long-run characteristic of investment, the study adopts the Fully Modified Ordinary Least Squares approach and tests for cointegration using Hansen (1992)'s Parameter Instability test.FindingsWe find that private capital formation increases in domestic debt and decreases in external debt during the pre-crisis period. However, during the period post the Global Financial Crisis, we find evidence of domestic public debt crowding out private capital formation, whereas external debt crowds-in capital formation. Debt service costs are found to reduce investment due to the effect of the debt overhang throughout the period under analysis.Research limitations/implicationsThe paper has important implications for macroeconomic policy. In particular, there is need for deleveraging and allocation of a higher proportion of debt to public infrastructure expenditure which has complementary effects on private investment.Practical implicationsDebt overhang signal that South African firms could be over-leveraged, which hinders future growth prospects. Firms that face high levels of debt should consider debt restructuring.Originality/valueEmpirical studies undertaken to explore this relationship have yielded contradicting results suggesting that the relationship between public debt and private investment is heterogeneous depending on a given economy or prevailing macroeconomic environment. In particular, existing research does not provide evidence on whether recent increases in public debt in South Africa have led to crowding-in or crowding-out of private investment. This paper therefore contributes to empirical literature on the impact of public debt on private investment within a small open economy.

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Public debt-investment nexus: the significance of investment-generation policy in West Africa

Cited by 4 publications

References 51 publications

Domestic and Foreign Debt Dynamics and Nonlinear Effects on Private Investments in Nigeria: Evidence with Asymmetric ARDL and Causality

Domestic and Foreign Debt Dynamics and Nonlinear Effects on Private Investments in Nigeria: Evidence with Asymmetric ARDL and Causality

Relationship between Public Debt and Exports in Nigeria: A Granger Causality and Threshold Analysis Approach

The impact of debt service costs and public debt on private capital formation in South Africa

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