The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)

Sylvester Bob Hadji

doi:doi:10.11648/j.jim.20231202.11

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The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)

Sylvester Bob Hadji

Published in Journal of Investment and Management (Volume 12, Issue 2)

Received: 2 May 2023 Accepted: 1 June 2023 Published: 14 September 2023

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Abstract

The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.

Published in	Journal of Investment and Management (Volume 12, Issue 2)
DOI	10.11648/j.jim.20231202.11
Page(s)	16-25
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Domestic Debt, Domestic Debt Accumulation, Debt Service, Debt Overhang, GDP, Private Investment, Economic Growth

References

[1]	Abass, S. M., and J. Christensen. (2007), “The Role of Domestic Debt Markets in Economic Growth”: An Empirical Investigation for Low-Income Countries and Emerging Markets. IMF Working Paper WP/07/127.
[2]	Adoufu, I., and M. Abula. (2010), “Domestic Debt and the Nigerian Economy”, Current Research Journal of Economic Theory, 2 (1), 22-26. Retrieved from http://www.maxwellsci.com.
[3]	Ajayi, E. A. (1989), “Nigerian Debt Management Experience”, Central Bank of Nigeria. 13 (2).
[4]	Alison, J. (2003), “Key Issues for Analysing Domestic Debt Sustainability”, Debt Relief International Publication, ISBN: 1-903971-07-1.
[5]	Christensen, J. (2005), “Domestic Debt Markets in Sub-Saharan Africa”, IMF staff paper, 52 (3); 518- 538.
[6]	Damian, K. U., and S. E. Chukwunonso. (2014), “Domestic Debt and Private Investment in Nigeria”. Int J of Sci Res and Edu; 8 (2): 2321-7545.
[7]	Elbadawi, I. A., B. J. Ndulu., and N. Ndungu. (1997), “Debt Overhang and Economic Growth in Sub-Saharan Africa”. In Iqbal, Z & Kanbur, R. Paper Presented at IMF and World Bank Conference on External Financing for Low-Income Countries, Washington, DC (pp. 49-77).
[8]	Fischer, S., and W. Easterly. (1990), “The Economics of the Government Budget Constraints”. The World Bank Research Observer, Vol. 5 (2), pp. 127-142.
[9]	Malik, K., and R. Atique. (2012), “Impact of Domestic and External Debt on the Economic Growth of Pakistan World Applied Sciences Journal. 20 (1), pp. 120-129.
[10]	Ministry of Finance, Public Debt Bulletin (Sierra Leone) (2018) pp. 3.
[11]	Onyeiwu, C. (2012), “Domestic Debt and the Growth of Nigeria Economy”, Research Journal of Finance and Accounting. 5 (3), pp. 45-56.
[12]	Pattillo, C., H. Poirson., and L. Ricci. (2002), “External debt and growth”, IMF Working Paper, No. 02/69, Washington DC, International Monetary Fund.
[13]	Pattillo, C., H. Poirson., and R. Ricci. (2004), “What Are The Channels Through Which External Debt Affects Growth?” IMF Working Paper, No. 04/15.
[14]	Sheikh, M. R., M. Z. Faradi., and K. Tariq. (2010), “Domestic Debt and Economic Growth in Pakistan”: An Empirical Analysis, Pakistan Journal of Science, 30 (2), 373-387. Retrieved from www.bzu.edu/PJSS/.
[15]	Sichula, M. (2012), “Debt Overhang and Economic Growth in HIPCs: The Case of Southern African Development Community (SADC)”. International Journal of Economics and Finance, 4 (10), pp. 82.
[16]	Uzochukwu, A. (2005), “Nigeria Public Debt and Economic Growth”, An Empirical Assessment of Effects of Poverty.
[17]	World Bank and International Monetary Fund. (2001), “Developing Government Bond Markets, a handbook”. World Bank, Washington.

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Sylvester Bob Hadji. (2023). The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). Journal of Investment and Management, 12(2), 16-25. https://doi.org/10.11648/j.jim.20231202.11

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Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J. Invest. Manag. 2023, 12(2), 16-25. doi: 10.11648/j.jim.20231202.11

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Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J Invest Manag. 2023;12(2):16-25. doi: 10.11648/j.jim.20231202.11

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@article{10.11648/j.jim.20231202.11,
  author = {Sylvester Bob Hadji},
  title = {The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)},
  journal = {Journal of Investment and Management},
  volume = {12},
  number = {2},
  pages = {16-25},
  doi = {10.11648/j.jim.20231202.11},
  url = {https://doi.org/10.11648/j.jim.20231202.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20231202.11},
  abstract = {The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.},
 year = {2023}
}

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TY  - JOUR
T1  - The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)
AU  - Sylvester Bob Hadji
Y1  - 2023/09/14
PY  - 2023
N1  - https://doi.org/10.11648/j.jim.20231202.11
DO  - 10.11648/j.jim.20231202.11
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 16
EP  - 25
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20231202.11
AB  - The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.
VL  - 12
IS  - 2
ER  -

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Author Information

Sylvester Bob Hadji

Department of Economics and Commerce, University of Sierra Leone, Freetown, Sierra Leone

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APA Style

Sylvester Bob Hadji. (2023). The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). Journal of Investment and Management, 12(2), 16-25. https://doi.org/10.11648/j.jim.20231202.11

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ACS Style

Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J. Invest. Manag. 2023, 12(2), 16-25. doi: 10.11648/j.jim.20231202.11

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AMA Style

Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J Invest Manag. 2023;12(2):16-25. doi: 10.11648/j.jim.20231202.11

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@article{10.11648/j.jim.20231202.11,
  author = {Sylvester Bob Hadji},
  title = {The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)},
  journal = {Journal of Investment and Management},
  volume = {12},
  number = {2},
  pages = {16-25},
  doi = {10.11648/j.jim.20231202.11},
  url = {https://doi.org/10.11648/j.jim.20231202.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20231202.11},
  abstract = {The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)
AU  - Sylvester Bob Hadji
Y1  - 2023/09/14
PY  - 2023
N1  - https://doi.org/10.11648/j.jim.20231202.11
DO  - 10.11648/j.jim.20231202.11
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 16
EP  - 25
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20231202.11
AB  - The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.
VL  - 12
IS  - 2
ER  -

Copy | Download