Threshold Analysis Of Public Debt On Economic Growth In Africa: Cs-Ardl And Cs-Dl Approach.

ABSTRACT The study aimed at estimating the threshold effects of public debt on economic growth within Africa using the Autoregressive Distributed Lag (ARDL), Distributed Lag (DL), Cross-sectionally augmented ARDL, and the Cross-sectionally augmented CS-DL models. The study also looked at the long-run effects of increasing public debt growth on economic growth. The study employed data from the Historical Public Debt Database (HPDD) and the International Financial Statistics (IFS) of the International Monetary Fund (IMF) spanning from 1970 to 2015 for 38 African Countries with a minimum of 30 years of consistent data. Using the models above, the study finds the threshold after which public debt becomes detrimental to growth in Africa lies between 20 to 50 percent. Inflation was also used as a proxy for countries that print currency to finance the budget deficit to check its effect on growth. The model with inflation finds the threshold to be 20 percent for Africa. The study also finds that increasing public debt beyond the range of 50 to 80 percent adversely affects economic growth. The study also finds that there is an adverse effect of a persistent debt rise on economic growth within the region. The significant debt trajectory suggests that if a country should be on a downward debt trajectory, it can grow fast. Subsequently, the study also investigated the threshold effects of public debt within some of the Regional Economic Communities in Africa for comparison with the threshold for the continent. The estimation was done for the Economic Community of West African States (ECOWAS) and the Common Markets for Eastern and Southern Africa (COMESA). The study, however, did not find a significant debt threshold for ECOWAS which is possible due to limited data. The study xi finds the threshold between 10 to 50 percent for COMESA and between 40 and 100 percent with inflation present in the model