Investigating asymmetric effects of public debt on economic growth in South Africa: a smooth transition regression (STAR) approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bongumusa Prince Makhoba ◽  
Irrshad Kaseeram ◽  
Lorraine Greyling
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Public Debt ◽  
Smooth Transition ◽  
Content Type ◽  
Asymmetric Effects ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Smooth Transition Regression ◽  
Nonlinear Autoregressive

PurposeThe primary purpose of the study is to analyse the asymmetric effects of public debt on economic growth, using secondary data over the period 1980–2018 in South Africa.Design/methodology/approachThis study estimated a Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach, using time series data to analyse the asymmetric effect of public debt on economic growth in South Africa.FindingsThe findings revealed a significant nonlinear relationship between public debt and economic growth in South Africa. The results showed an inverted U-Shape relationship, implying a significant positive influence of public debt on economic growth during the low-debt regime. While during a high-debt regime, public debt exerted a significant negative effect on economic growth. The study proposes that policymakers ought to consider targeting a sustainable debt threshold that would enhance efficient use of public finances consistent with long-term economic prosperity.Originality/valueThis paper asymmetries and threshold effects between public debt and economic growth in South Africa, through the application of dynamic nonlinear models namely, Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach. Studies on the relationship under examination have predominantly been confined in advanced economies. This study provides rigorous empirical evidence from the South African perspective.

Asymmetric and threshold effects of public debt on economic growth in SADC: a panel smooth transition regression analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bongumusa Prince Makhoba ◽  
Irrshad Kaseeram ◽  
Lorraine Greyling
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Threshold Effect ◽  
Smooth Transition ◽  
Content Type ◽  
Advanced Economies ◽  
Smooth Transition Regression ◽  
Asymmetric Relationships ◽  
Panel Smooth Transition Regression

PurposeThis study aims to interrogate dynamic asymmetric relationships between public debt and economic growth in Southern African Developing Communities (SADC), over the period 2000–2018.Design/methodology/approachThe study employed a panel smooth transition regression (PSTR) technique to analyse dynamic asymmetric relationships between public debt and economic growth, and the threshold effect at which public debt hampers economic growth.FindingsThe findings indicate that there is a significant nonlinear effect of debt on economic growth in SADC. The study discovered a debt threshold of 60% to GDP at which debt beyond this threshold deteriorates long-term growth. The low-debt regime was found to be positive and statistically significant, while the high-debt regime is detrimental for long-term growth. Fiscal policymakers ought to consider the adoption of well-coordinated debt policies that aims to strike a balance between sustainable public debt and economic growth, within a reasonable threshold target.Originality/valueThe study focusses on asymmetric and threshold analysis of public debt on economic growth in SADC using sophisticated panel smooth transition regression (STAR). This study provides rigorous empirical evidence within the SADC perspective in which previous studies have predominantly been confined in advanced economies.

scholarly journals Causality Between Public Debt, Public Debt Service and Economic Growth in an Emerging Economy

2020 ◽  
Vol 65 (1) ◽  
pp. 1-19
Author(s):  
Talknice Saungweme ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Public Debt ◽  
Debt Service ◽  
Bounds Testing ◽  
Causality Test ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run

AbstractThis paper explores the causality between public debt, public debt service and economic growth in South Africa covering the period 1970 – 2017. The study employs the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and the multivariate Granger-causality test. The empirical results indicate that there is unidirectional causality from economic growth to public debt, but only in the short run. However, the study fails to establish any causality between public debt service and economic growth, both in the short run and long run. In line with the empirical evidence, the study concludes that it is economic growth that drives public debt in South Africa, and that the causal relationship between public debt and economic growth is sensitive to the timeframe considered. The paper recommends policymakers in South Africa to consider growth-enhancing policies in the short run, since poor economic performances may lead to high public debt levels.

scholarly journals Asymmetric Effects of Remittances on Economic Growth in Nigeria: Evidence From Non-linear ARDL Analysis

2020 ◽  
Author(s):  
David Oluseun Olayungbo ◽  
Clement Olalekan Olaniyi ◽  
Titus Ayobami Ojeyinka
Keyword(s):  
Economic Growth ◽  
Jel Classification ◽  
Asymmetric Effects ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Linear Effects ◽  
Nonlinear Autoregressive ◽  
Nardl Model

Abstract Most of the extant studies on remittance-growth nexus have been limited to symmetric and linear effects of remittance on economic growth. Unlike previous studies, we examine asymmetric and nonlinear association between remittance and economic growth within the framework of nonlinear autoregressive distributed lag (NARDL) model utilizing Nigeria’s data from 1981 to 2018. The study finds the evidence to support that growth responds asymmetrically to remittances only in the long-run. It is established that both positive and negative variations in remittance inflows dampen the productive base of the economy in the long-run while positive and negative changes in remittances are growth-retarding and growth-enhancing respectively in the short-run. The study, therefore, concludes that persistent increase in remittance inflows have not been channeled to productive ventures that are capable of stimulating growth in Nigeria. Thus, consistent with the view of pessimistic theorists, continual inflows of remittances to Nigeria could not be termed brain gains to the economy. JEL CLASSIFICATION: F24, F43, O11

Public Debt Service in South Africa and Its Impact on Economic Growth: An Empirical Test

2020 ◽  
pp. 003464462096022
Author(s):  
Talknice Saungweme ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Public Debt ◽  
Empirical Test ◽  
Debt Service ◽  
Policy Implications ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run

By applying the autoregressive distributed lag approach, this article investigates the dynamic impact of public debt service on economic growth in South Africa, covering the period from 1970 to 2017. In the recent past, alarming bells have already started sounding about the country’s high debt/gross domestic product (GDP) ratio amid chronic low GDP growth. The article seeks to contribute to the debate that limiting the proportion of public debt service payments to gross national product can achieve economic growth by freeing domestic resources. The empirical findings of the study show that there is no statistically significant relationship between public debt service and economic growth in South Africa, irrespective of whether the estimations are done in the long run or in the short run. Policy implications are discussed.

Asymmetric effects of exchange rate on money demand in Nigeria: evidence from the new broad money aggregate (M3)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Udoma Johnson Afangideh ◽  
Tuwe Soro Garbobiya ◽  
Farida Bello Umar ◽  
Nuruddeen Usman ◽  
Victor Unekwu Ocheni ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Testing Procedure ◽  
Demand For Money ◽  
Content Type ◽  
Asymmetric Effects ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Exchange Rate Changes ◽  
Nonlinear Autoregressive

PurposeThis paper is focused on determining the asymmetric effects of exchange rate on money demand function in Nigeria.Design/methodology/approachIt employs the empirical model of Baumol–Tobin. Baumol (1952), which was founded on the opportunity and transaction cost of holding money. Monetary aggregates, M1, M2 and M3, are used for the real money balances based on the nonlinear Autoregressive Distributed Lag bound testing procedure.FindingsThe results indicate that the positive and negative partial sum of exchange rate changes differ in magnitude and size, supporting the hypothesis of asymmetric effects of exchange rate changes on the demand for money in Nigeria.Originality/valueThis is the first paper to consider the new broad money aggregate (M3).

Economic growth and income inequality: a non-linear econometrics analysis of the SADC region, 1990–2015

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lindokuhle Talent Zungu ◽  
Lorraine Greyling ◽  
Nkanyiso Mbatha
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Threshold Level ◽  
Transition Function ◽  
Smooth Transition ◽  
Lower Growth ◽  
Content Type ◽  
Job Opportunities ◽  
Lm Test ◽  
Smooth Transition Regression

PurposeThe authors investigate the growth–inequality relationship, using panel data from 13 Southern African Development Community (SADC) countries over the period 1990–2015, to test the validity of the Kuznets and Tribble theories. Furthermore, the authors seek to determine the threshold level at which excessive growth hampers inequality.Design/methodology/approachThe panel smooth transition regression (PSTR) model has several stages. The authors applied the Lagrange multiplier (LM) test to find the appropriate transition variable amongst all candidate variables, to assess the linearity between economic growth and income inequality and to find the sequence for selecting the order m of the transition function. The authors then estimated the PSTR model, but before facilitating the results, the authors first used the wild cluster bootstrap (WCB)–LM-type test to assess the appropriateness of the selected transition.FindingsThe authors found that at lower growth, income inequality tends to be lower, while if growth increases above US$8,969, inequality tends to increase in the SADC region. The findings combine into a U-shaped relationship, contradicting the Kuznets and Tribble theories.Originality/valueThe contribution of this paper is that it becomes the first to provide the threshold level at which excessive growth increases inequality in the selected countries. This study proposes that policymakers should focus on activities aimed at stimulating growth, in other words, activities such as spending more on infrastructure, drawing up a suitable investment portfolio and spending on technological investment for countries that are below US$8,969. An improvement in these activities will create job opportunities, which in turn will add to economic growth and thus lead to lower income inequality and better social cohesion.

scholarly journals The Nexus Between Taxation, Government Expenditure and Economic Growth in South Africa. A fresh evidence from combined cointegration test

2021 ◽  
Vol 39 (3) ◽  
Author(s):  
Delani Moyo ◽  
Ahmed Samour ◽  
Turgut Tursoy
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Government Expenditure ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Integration Test ◽  
Lag Model ◽  
The Relationship

The relationship between taxation, government expenditure and economic growth. is a widely debated issue in the literature. The aim of this research is to present a fresh evidence from the nexus of taxation, government expenditure and economic growth in for the period 1991-2018 in South Africa, using recently developed combined co-integration test. Autoregressive Distributed Lag model(ARDL) is utilized to examine coefficients between the variables in the short and long-run The newly advanced Bayer-Hacks (BH) combined co-integration approach is employed so as to verify the ARDL bounds result. The empirical results from ARDL model revealed that there is a positive and significant relationship between government expenditure and economic growth in both short and long run. In addition, the study shows that tax revenue has a significant positive relationship with the economic growth. Therefore, levels of taxation and government expenditure are favorable to the growth of economy in South Africa. The research proposed that decision makers in South Africa should pay more attention on Taxation and government expenditure policies and the gains from economic growth such as channel much of its expenditure towards the manufacturing and agricultural sectors, which have great potentials of increasing the supply of the products. Which in turn leads to reduce prices and increase in the rates of employment. This would, also make the country’s exports prices competitive.

Sign in / Sign up

Export Citation Format

Share Document