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Government debt, government debt service and economic growth nexus in Zambia: a multivariate analysis

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  • Talknice Saungweme
  • Nicholas M. Odhiambo

Abstract

This paper explores the causal relationships between public debt and economic growth, and between public debt service and economic growth in Zambia for the period from 1970 to 2017. Unlike previous studies on this subject that relied on bivariate frameworks, this paper includes fiscal balance and savings as intermittent variables to minimise the problem of omission-of-variable bias. Using a dynamic multivariate autoregressive-distributed lag (ARDL)-bounds testing approach, the results indicate that there is unidirectional Granger-causality from economic growth to public debt in Zambia, irrespective of whether the analysis is done in the short run or in the long run. The study results, however, fail to find any causality between public debt service and economic growth in Zambia. These study findings support the hypothesis that the pace of economic growth matters in defining the level of public sector indebtedness. The study, therefore, recommends that the Zambian government should channel borrowed funds towards the expansion and diversification of the country’s economy. This will promote its long-term economic growth, broaden its revenue base, and enhance its ability to repay its financial obligations when they fall due.

Suggested Citation

  • Talknice Saungweme & Nicholas M. Odhiambo, 2019. "Government debt, government debt service and economic growth nexus in Zambia: a multivariate analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1622998-162, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1622998
    DOI: 10.1080/23322039.2019.1622998
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    Cited by:

    1. Chen, Jingquan & Ma, Wanying & Kchouri, Bilal & Ribeiro-Navarrete, Samuel, 2024. "Resource rich yet debt ridden: The role of natural resources and debt servicing in sustainable economic growth," Resources Policy, Elsevier, vol. 89(C).
    2. Samson Edo, 2024. "Comparative Performance of Trade Openness and Sovereign Debt Accumulation in Fostering Economic Growth of Sub-Saharan African Countries," Foreign Trade Review, , vol. 59(1), pages 98-116, February.
    3. Zhang, Ailian & Pan, Mengmeng & Liu, Bai & Cao, Xianbin, 2023. "Do high-speed rail (HSR) station and airport affect local government debt risk? Evidence from China," Transport Policy, Elsevier, vol. 134(C), pages 41-51.
    4. Ahmed Oluwatobi Adekunle, 2022. "The Debt-Growth Nexus in Nigeria: An Empirical Evidence," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 155-161, November.
    5. Emmanuel John Kaka & Abdullahi Bala Ado, 2020. "An investigation of the link between indirect tax, oil receipt, debt on foreign reserves in Nigeria," Journal of Contemporary Accounting, Master in Accounting Program, Faculty of Business & Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia, vol. 2(3), pages 119-128, August.
    6. Kazi Musa & Kazi Sohag & Jamaliah Said & Farha Ghapar & Norli Ali, 2023. "Public Debt, Governance, and Growth in Developing Countries: An Application of Quantile via Moments," Mathematics, MDPI, vol. 11(3), pages 1-13, January.
    7. Blessing Ose Oligbi, Ph D, 2024. "Government Expenditure and Public Debt in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(6), pages 129-141, June.
    8. Ergin Akalpler, 2023. "Triggering economic growth to ensure financial stability: case study of Northern Cyprus," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-40, December.
    9. Pradhan , Rudra P. & Arvin, Mak B. & Nair , Mahendhiran & Hall , John H., 2022. "Public Debt, Economic Openness, And Sustainable Economic Growth in Europe: A Dynamic Panel Causal Analysis," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(1), pages 167-183, March.
    10. Anselm K. Abotsi, 2023. "Factors influencing the ability to honour debt repayment obligations by Governments in Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 876-885, January.
    11. Abdulkarim Yusuf & Saidatulakmal Mohd, 2024. "Investigating the Asymmetric Impact of Public Debt on Economic Growth in Nigeria," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 9452-9481, June.
    12. Abdulkarim Yusuf & Saidatulakmal Mohd, 2023. "Nonlinear effects of public debt on economic growth in Nigeria," SN Business & Economics, Springer, vol. 3(4), pages 1-31, April.

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