Threshold Effect of Public Debt on Domestic Investment: Evidence from Selected African Countries
In this paper, we study the non-linear relationship between total public debt and domestic investment, across a panel of 10 African economies from 1981 to 2010. Our analysis, based on a panel threshold approach proposed by Hansen (1999), confirms the significance of the nonlinear relationship betwee...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2015-12-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1144.pdf
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| Summary: | In this paper, we study the non-linear relationship between total public debt and
domestic investment, across a panel of 10 African economies from 1981 to 2010. Our
analysis, based on a panel threshold approach proposed by Hansen (1999), confirms the
significance of the nonlinear relationship between public debt and domestic investment.
The results indicate that public debt lower than 47.31 percent of GDP is positively
associated with domestic investment. However, once the debt exceeds this threshold, the
relationship between public debt and investment becomes negative. Moreover, we find some
evidence that at this level, public debt limits the government’s ability to undertake
countercyclical policies. |
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| ISSN: | 1841-8678 1844-0029 |