Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach

Figures & data

Figure 1. Public debt (% of GDP) profile in the sub-Saharan African region.

Figure 2. Trend in inflation and economic growth in sub-Saharan African region from 2005 to 2022.

Table 1. Descriptive statistics of the model variables.

Variable	Acronym	Mean	Standard deviation	Min	Max
Inflation	INF	1.58	1.08	−3.20	6.32
Exchange rate	EXR	1.44	0.79	−3.38	3.03
Gross domestic product	GDP	5.12	2.02	−0.09	9.19
Official development assistance	ODA	8.12	8.67	0.01	92.14
Foreign borrowing	FB	42.42	38.82	0.46	497.93
Domestic borrowing	DB	25.44	22.23	−23.19	142.63
Total debt as % GDP	TB	66.38	50.52	−21.91	607.10
Broad money supply	M2	32.94	22.18	4.53	163.84
Capital formation	CPF	23.37	10.45	−3.95	79.40
Foreign direct investment	FDI	5.07	8.66	−11.19	103.33
Real interest arte	RIR	8.21	11.08	−79.80	65.31

Note. Inflation and exchange rates as expressed in log form.

Table 2. Panel test stationarity.

Variable	Inverse chi-squared (P)	Inverse normal (Z)	Inverse logit (L*)	Modified inv. chi-squared (Pm)
Inflation	222.29***	−6.79***	−7.31***	9.86***
Exchange rate (d)	394.19***	−13.63***	−15.82***	23.08***
Gross domestic product	359.42***	−8.45***	−12.50***	20.08***
Official development assistance	270.08***	−6.81***	−9.51***	13.42***
Foreign borrowing	442.60***	−5.96***	−13.16***	26.28***
Domestic borrowing (d)	388.26***	−11.61***	−15.33***	22.63***
Money supply (d)	226.97***	−7.97***	−8.19***	10.47***
Capital formation	147.01***	−2.10***	−2.99***	4.24***
Foreign direct investment	248.81***	−8.07***	−8.75***	11.83***
Total public debt as % of GDP	144.26***	−1.95**	−2.79*	4.04***
Real interest rate	318.44***	−10.62***	−12.94***	18.08***

Note. ***, ** and * denote 1%, 5% and 10% significance levels respectively.

Table 3. Cointegration test results.

Kao test for cointegration	Statistic	p-value
Dickey-Fuller t	6.27***	0.000
Modified Dickey-Fuller t	10.55***	0.000
Augmented Dickey-Fuller t	6.08***	0.000
Unadjusted modified Dickey-Fuller t	5.27***	0.000
Unadjusted Dickey-Fuller t	7.36***	0.000
Pedroni test for cointegration
Modified Phillips-Perron t	5.95***	0.000
Phillips-Perron t	1.56**	0.028
Augmented Dickey-Fuller t	−2.18**	0.015
Modified Phillips-Perron t	5.95***	0.000

Note. ***, ** and * denote 1%, 5% and 10% significance levels respectively.

Table 4. Correlation matrix.

	INF	GDP	EXR	ODA	FB	DB	CPF	TB	RIR	M2	FDI
INF	1.00
GDP	0.13	1.00
EXR	0.17	0.05	1.00
ODA	0.08	0.14	0.14	1.00
FB	−0.15	−0.25	0.31	0.24	1.00
DB	−0.07	−0.08	0.02	−0.01	−0.03	1.00
CPF	−0.03	0.11	0.06	−.077	0.19	0.08	1.00
TB	0.01	0.26	−0.15	0.25	0.92	0.86	0.08	1.00
RIR	0.14	0.04	0.09	0.03	0.06	0.12	0.18	0.07	1.00
M2	−0.13	−0.17	0.08	0.01	0.07	0.49	0.01	0.02	0.13	1.00
FDI	0.06	0.14	0.11	0.17	0.22	−0.01	0.02	0.26	0.21	0.18	1.00

Table 5. Public debt and inflation among sub-Saharan countries.

Variable name	OLS	FEM	DIF-GMM	SYS-GMM
lnInfltaion(-1)	0.569*** (0.000)	0.151** (0.002)	0.158 (0.310)	0.366*** (0.000)
Domestic borrowing (d)	0.006** (0.044)	0.011 (0.146)	0.146** (0.010)	0.142*** (0.000)
Foreign borrowing	0.0002 (0.157)	0.001** (0.013)	0.008** (0.026)	0.049** (0.002)
Official development assistance	0.010** (0.021)	0.020** (0.005)	0.068** (0.012).	0.071*** (0.000)
Capital formation	−0.002** (0.032)	−0.0003 (0.945)	−0.025** (0.029)	−0.022** (0.001)
Real interest rate	−0.001* (0.083)	−0.018** (0.001)	−0.042** (0.001)	−0.024* (0.053)
Money supply (d)	0.030** (0.024)	0.024** (0.053)	0.032 (0.743)	0.066* (0.036)
Gross domestic product	−0.002 (0.831)	0.007 (0.441)	.035** (0.048)	0.068** (0.013)
AR(1)			0.022	0.007
AR(2) test			0.500	0.396
Sagan test for over identification			0.550	0.534

Note. ***, ** and * denote 1%, 5% and 10% significance levels respectively.

Table 6. Public debt and economic growth among sub-Saharan African countries estimation results.

Variable name	OLS	FEM	DIF-GMM	SYS-GMM
ln.GDP(-1)	.3657** (0.000)	.2407*** (000)	.1999** (0.007)	.3372** (0.004)
Domestic borrowing (d)	−.0119** (0.040)	−.01449** (0.014)	−.0391* (0.094)	−.0560*** (0.001)
Foreign borrowing	−.00197** (0.027)	−.0109 (0.334)	−.00432** (0.043)	−.0092** (0.002)
Official development assistance	.00853** (0.044)	.00233* (0.099)	.0076 (0.275)	.0265** (0.010)
Capital formation	.00754** (0.021)	.01618** (0.006)	.01439** (0.043)	.0130* (0.097)
Real interest rate	−.010132** (0.008)	−.0210** (0.001)	−.03027 (0.259)	−.0526** (0.029)
Foreign direct investment	.00890** (0.026)	.0183*** (0.000)	.0333* (0.064)	.0551** (0.022)
EXR	−.00315* (0.097)	−.008580 (0.873)	−.0316 (0.299)	−.0307* (0.085)
AR(1)			0.005	0.017
AR(2) test			0.584	0.244
Sagan test for over-identification			0.389	0.285

Note. ***, ** and * show 1%, 5% and 10% significance levels respectively.

Data availability statement

The data used in this study is freely available on World Bank Open Data base (https://data.worldbank.org/), International Monetary Fund IMF (https://www.imf.org/en/Data) and www.tradingeconomics.com and also upon requesting the corresponding author.