The Relationship Between Fiscal Performance, Governance Quality, and Economic Growth: Evidence From Sub-Saharan Countries

Abstract

Many studies in recent years have focused on the relationship between the government's ability to manage and economic performance indicators. There is ample empirical evidence that factors such as the presence of corruption, violence, and terrorism in a country, and the quality of institutions controlling the market affect the success of economic policies. Similarly, the issue of how the public debt stock affects economic growth has been the central question of many studies. Especially in recent years, the violence, terrorism, and separatist wars that have emerged in Africa have led to the intensification of studies on the continent. In addition, there are many studies supporting that the climate of insecurity created by the violence and terrorist incidents in the continent is the cause of the failure of governance in Africa. Governance failure is also an indicator of ineffectiveness in the formulation and implementation of public policies. This study focuses on investigating the effects of fiscal performance and governance quality on economic growth in Sub-Saharan African countries. In the study, data from 25 sub-Saharan African countries for the period 2002-2019 were used. According to the results of the analysis, as public expenditures increase in the mentioned countries, economic growth decreases. In terms of the focus of the study, it has been found that as fiscal performance and governance quality increase, economic growth also increases. As a fiscal performance indicator, the arithmetic average of the public's domestic and external debt stock was calculated and included in the analysis. An increase in the fiscal performance value means an increase in the country's debt stock.