Sustainability of Public Debt and Economic Growth in Cote d’Ivoire: is There a Threshold Effect?

Koffi Pokou (Dept of Economics, University Felix Houphouet Boigny, Abidjan, Cote d’Ivoire.)

Article ID: 753

DOI: https://doi.org/10.30564/jesr.v3i3.753

Abstract


The development of Ivorian public debt in recent years has raised concerns. Is its current level capable of boosting the economy or, on the contrary, being at the source of a recession? This paper analyzes the effect of the level of indebtedness on economic growth in Côte d’Ivoire using the Threshold Autoregressive (TAR) model over the period 1970-2018. The results obtained in the short run shed light on the no relationship between public debt and economic growth. In the long run, on the other hand, there is a bi-directional granger causality between public debt and the sustainability of economic growth. The non-linearity between the variables of interest has been studied and the results show the presence of a threshold effect: beyond 48.03 percent of GDP, any increase in public debt by 1% should reduce economic growth by 0.28%. Thus, the study questions the relevance of the criterion set by the WAEMU: public debt <70% of GDP.


Keywords


Public Debt and Growth Sustainability;Threshold Autoregressive (TAR);Granger Causality;Threshold Effects

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References


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