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Fiscal policy burden accruing from public debt accumulation: theoretical effect on growth and empirical evidence
Samson Edo* 
Osaro Oigiangbe*
Osaro Oigiangbe
Affiliation: Department of Economics, University of Benin, Benin City, Nigeria
 0009-0009-3580-6972
Article | Year: 2025 | Pages: 129 - 152 | Volume: 49 | Issue: 1 Received: March 15, 2024 | Accepted: August 19, 2024 | Published online: March 10, 2025
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
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Angola
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Djibouti
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Madagascar
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Sierra Leone
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Benin
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Equatorial Guinea
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Malawi
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Somalia
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Botswana
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Eswatini*
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Mali
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South Africa
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Burkina Faso
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Eritrea
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Mauritania*
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South Sudan*
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Burundi
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Ethiopia
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Mauritius
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Sudan
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Cameroon
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Gabon
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Mozambique
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Tanzania
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Cape Verde
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Gambia
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Namibia
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Togo
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Central African Rep.
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Ghana
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Niger
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Uganda
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Chad
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Guinea
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Nigeria
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Zambia
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Comoros
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Guinea-Bissau*
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Rwanda
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Zimbabwe
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Congo DRC
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Kenya
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Sao Tome & Principe
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Congo Rep.
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Lesotho
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Senegal
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Cote d’Ivoire
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Liberia*
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Seychelles
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Source: World Bank Open database.
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Sample size = 45 countries
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Estimation period = 1990-2022
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Observations = 1,485
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Statistic
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Variable
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Mean
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Median
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Max.
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Min.
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Std. dev.
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Skewness (Pearson coefficient)
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Kurtosis
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Jarque-Bera test
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EG
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3.3
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2.87
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6.1
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-2.1
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4.3
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0.55
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3.9
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0.16
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FT
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56.1
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55.3
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78.6
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31.2
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23.7
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0.59
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4.6
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0.22
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FD
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42.3
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40.1
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60.4
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26.6
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17.1
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0.61
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3.7
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0.09
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PC
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23.2
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22.5
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25.5
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17.3
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4.7
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0.56
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3.2
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0.18
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HC
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61.4
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60.4
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68.3
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52.1
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8.2
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0.53
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2.5
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0.11
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TR
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33.9
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42.3
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59.7
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27.5
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19.4
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0.34
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2.8
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0.14
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PG
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2.6
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2.5
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2.9
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2.2
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0.33
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0.52
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4.9
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0.27
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Source: Authors’ computer estimation.
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Sample size: 45
countries
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Estimation
period: 1990-2022
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Unit root test
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Variable
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Level
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First difference
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LLC
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IPS
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HD
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LLC
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IPS
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HD
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EG
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3.14*
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2.88*
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1.31*
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-
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-
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-
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FT
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1.23
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1.03
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2.99
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2.64*
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3.22*
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1.34*
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FD
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1.16
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1.09
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2.74
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2.57*
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2.83*
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1.19*
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PC
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1.11
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1.07
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3.03
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2.79*
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2.44*
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1.21*
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HC
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1.18
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1.15
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2.87
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3.05*
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2.58*
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1.06*
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TR
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1.09
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1.21
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3.11
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2.64*
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3.01*
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1.11*
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PG
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1.12
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1.16
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3.06
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2.55*
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2.39*
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1.17*
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Critical values:
LLC = 2.06, IPS = 1.95, HD = 1.87
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*Variable is stationary. Variables: EG = economic growth, FT = fiscal policy burden from total debt, FD = fiscal policy burden from domestic component of total public debt, PC = physical capital, HC = human capital, TR = trade, PG = population growth. Note: LLC = Levin-Lin-Chu test, IPS = Im-Pesaran-Shin test, HD = Hadri test. In LLC and IPS, larger statistics indicate more stationary variables. In HD, smaller statistics indicate more stationary variables. Source: Authors’ computer estimation.
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Dependent variable
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Explanatory
variable
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EG
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FT
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FD
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PC
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HC
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TR
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PG
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EG-1
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EG-2
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-0.61*
(-3.17)
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-0.52*
(-2.13)
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0.64*
(3.33)
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0.56*
(2.28)
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0.50*
(2.13)
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-0.34
(-1.02)
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0.49*
(2.04)
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0.47*
(1.99)
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Diagnostic test
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Pearson chi-square test for
goodness of fit
(critical p-value = 0.05)
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Sargan test
(0.05 ˂ p ≤ 1)
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A-B 1st order
correlation test
(0 ˂ p ˂ 0.1)
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A-B 2nd order
correlation test
(0.25 ˂ p ≤ 1)
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Akaike (AIC)
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2.01
(0.019)
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6.92
(0.38)
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2.32
(0.07)
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1.24
(0.36)
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12.06
(Minimum)
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Variables: EG = economic growth, FT = fiscal policy burden from total debt, FD = fiscal policy burden from component of total public debt, PC = physical capital,
HC = human capital, TR = trade, PG = population growth, EG-1 and EG-2 = lagged dependent variables (instrumental variables). Source: Authors’ computer estimation.
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Dependent variable: EG
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Independent
variable
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FD excluded
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FT excluded
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Coefficient
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t-value
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Coefficient
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t-value
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Intercept
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2.11
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8.73
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1.94
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1.99
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FT
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-0.57*
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2.31
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–
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–
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FD
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–
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–
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-0.39*
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2.17
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PC
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0.60*
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3.11
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0.58*
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2.86
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HC
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0.51*
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2.31
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0.46*
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2.19
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TR
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0.43*
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2.08
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0.50*
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2.28
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PG
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-0.24
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0.97
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-0.27
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1.07
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EG-1
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0.40*
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2.01
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0.38*
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2.12
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EG-2
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0.46*
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2.22
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0.41*
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2.09
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Sargan test
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3.03
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2.56
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(0.05 ˂ p ≤ 1)
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(0.29)
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(0.41)
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Source: Authors’ computer estimation.
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Dependent
variable
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Explanatory
variable
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MG estimator
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PMG estimator
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Coefficient
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t-value
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Long-run multiplier coefficient
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Coefficient
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t-statistic
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Long-run multiplier coefficient
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EG
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Intercept
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1.52
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5.02
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-
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2.07
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5.07
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-
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EG-1
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0.44*
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1.97
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-
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0.51*
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2.11
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-
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FT
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-0.59*
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-2.76
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-2.43
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-0.53*
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-2.11
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-2.13
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FD
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-0.55*
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-2.53
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-2.22
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-0.50*
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-2.06
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-2.00
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PC
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0.66*
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3.29
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2.94
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0.60*
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3.02
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2.50
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HC
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0.58*
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2.72
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2.38
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0.54*
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2.21
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2.16
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TR
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0.49*
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1.99
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1.96
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0.56*
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2.42
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2.27
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PG
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-0.29
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-1.01
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-1.40
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-0.31
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-1.04
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-1.44
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Wald test
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3.92
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4.33
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(Critical p-value
= 0.05)
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(0.009)
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(0.006)
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Hausman test (H0
= PMG, H1 = MG): t-statistic = 0.89, p-value = 0.13 (critical
p-value = 0.05).
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Variables: EG = economic growth, FT = fiscal policy burden from total debt, FD = fiscal policy burden from component of total public debt, PC = physical capital,
HC = human capital, TR = trade, PG = population growth, EG-1 = lagged dependent variable. Source: Authors’ computer estimation.
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Endogenous variable: EG
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Exogenous variable
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Total period
(1990-2022)
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Sub-period 1
(1990-2007)
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Sub-period 2
(2008-2022)
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Coefficient
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Asymptotic t-statistic
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Coefficient
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Asymptotic t-statistic
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Coefficient
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Asymptotic t-statistic
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Intercept
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0.28
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1.18
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0.32
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1.20
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0.30
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1.15
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FT
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0.23
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1.06
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0.26
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1.13
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0.24
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1.08
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FD
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0.24
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1.08
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0.25
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1.12
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0.21
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1.01
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PC
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0.30
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1.16
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0.31
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1.17
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0.22
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1.06
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HC
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0.29
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1.14
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0.29
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1.19
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0.32
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1.20
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TR
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0.31
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1.19
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0.27
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1.15
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0.29
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1.18
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PG
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0.25
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1.11
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0.30
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1.16
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0.27
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1.16
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EG-1
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0.27
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1.16
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0.28
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1.14
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0.31
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1.19
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Alternative break point
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Structural break
parameter estimate
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Normalized bias
statistic
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Standard
deviation (SD)
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Root mean square
error (RMSE)
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Rho 1
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Rho 2
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1997
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0.05
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0.06
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0.31
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0.15
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0.22
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1998
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0.07
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0.04
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0.29
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0.13
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0.25
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1999
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0.06
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0.05
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0.32
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0.11
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0.27
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2000
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0.09
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0.10
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0.30
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0.16
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0.23
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2001
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0.08
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0.07
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0.34
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0.14
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0.20
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2002
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0.05
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0.09
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0.33
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0.10
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0.21
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2003
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0.11
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0.08
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0.36
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0.12
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0.24
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March, 2025
I/2025
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