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The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model

Received: 30 November 2020     Accepted: 16 December 2020     Published: 22 December 2020
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Abstract

This research investigated empirically the impact of the government of Liberia (GOL) debt on economic growth from 1970 to 2020. The findings from several studies in different regions of the world present mixed result and at times, controversial results on the impact of debt on the health of a country’s economy. Its objective was to ascertain whether debt, both domestically and foreign, has an impact on economic growth in Liberia over the period of 50 years. Despite the theoretical foundation that debt stymied economic growth, the result from the analysis prove contrary to existing body of literature relative to the Liberian economy. The paper reviewed several literatures from various sources and regions to build the foundation for this work. The work used annual time series data of National debt (both domestic and foreign) and Gross domestic product (GDP) as well as annual data for revenue and expenditure for the periods under research. Data for national debt and GDP were obtained from the world development index, the World Bank and the international monetary fund while data for government revenue and government expenditure were both obtained from the fiscal outturn from the ministry of finance and development planning in Liberia. The paper established that there exists a long run relationship between national debt and economic growth in Liberia. It also established that there exist a bidirectional relationship between national debt and economic growth in Liberia.

Published in International Journal of Business and Economics Research (Volume 9, Issue 6)
DOI 10.11648/j.ijber.20200906.13
Page(s) 382-388
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), 2020. Published by Science Publishing Group

Keywords

Economic Growth (GDP), National Debt, Government Expenditure, Government Revenue

References
[1] Barro, R. J. (1979). On the determination of the public debt. Journal of Political Economy, 87 (5, Part 1), 940–971.
[2] Abbas S. M. A. and Christesen, J. E. (2007): The role of domestic debt markets in economic growth: An empirical investigation for low–income countries and emerging markets. Working Paper 07/127. Washington, DC: International Monetary Fund.
[3] Aschauer, D. A. (1989): Is public expenditure productive? Journal of Monetary Economics, 23: 177–200.
[4] Cochrane, J. H. (2011): Understanding policy in the Great Recession: Some unpleasant fiscal arithmetic. European Economic Review, 55: 2–30.
[5] Devarajan, S., Swaroop, V., and Zou, H. G. (1996): The composition of public expenditure and economic growth. Journal of Monetary Economics, 37: 313–344.
[6] Eberhardt, M. and Presbitero, A F. (2015): Public debt and growth: Heterogeneity and nonlinearity. Journal of International Economics, 97: 45–58.
[7] Elmendorf, D. W. and Mankiw, N. G. (1999): Government debt. In J. B. Taylor – M. Woodford (Eds), Handbook of Macroeconomics, Vol. 1C (pp. 1615–1669). Amsterdam: North-Holland.
[8] Karadam, D. Y. (2018). An investigation of nonlinear effects of debt on growth. Journal Of Economic Asymmetries, 18, 1–13. doi: 10.1016/j.jeca.2018.e00097.
[9] Nelson, C. and Plosser, C. (1982) Trends and random walks in macroeconopmic time series. Some evidence and implication. Journal of monetary economics. North-Holland publishing company.
[10] Panizza, U. and Presbitero, A. F. (2013): Public debt and economic growth in advanced economies: A survey. Swiss Journal of Economics and Statistics, 149: 175–204.
[11] Reinhart, C. M., Reinhart, V., & Rogoff, K. (2015). Dealing with debt. Journal of International Economics, 96 (S1), S43–55. doi: 10.1016/j.jinteco.2014.11.001.
[12] Salotti, S. and Trecroci, C. (2016): The impact of government debt, expenditure and taxes on aggregate investment and productivity growth. Economica, 83: 356–384.
[13] United Nations. (2018). Sustainable development goals. Retrieved from https://www.un.org/sustainabledevelopment
[14] United Nations Human Development Report (2018) poorest countries on the earth.
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  • APA Style

    Lester Zomatic Tenny. (2020). The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model. International Journal of Business and Economics Research, 9(6), 382-388. https://doi.org/10.11648/j.ijber.20200906.13

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    ACS Style

    Lester Zomatic Tenny. The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model. Int. J. Bus. Econ. Res. 2020, 9(6), 382-388. doi: 10.11648/j.ijber.20200906.13

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    AMA Style

    Lester Zomatic Tenny. The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model. Int J Bus Econ Res. 2020;9(6):382-388. doi: 10.11648/j.ijber.20200906.13

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  • @article{10.11648/j.ijber.20200906.13,
      author = {Lester Zomatic Tenny},
      title = {The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model},
      journal = {International Journal of Business and Economics Research},
      volume = {9},
      number = {6},
      pages = {382-388},
      doi = {10.11648/j.ijber.20200906.13},
      url = {https://doi.org/10.11648/j.ijber.20200906.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20200906.13},
      abstract = {This research investigated empirically the impact of the government of Liberia (GOL) debt on economic growth from 1970 to 2020. The findings from several studies in different regions of the world present mixed result and at times, controversial results on the impact of debt on the health of a country’s economy. Its objective was to ascertain whether debt, both domestically and foreign, has an impact on economic growth in Liberia over the period of 50 years. Despite the theoretical foundation that debt stymied economic growth, the result from the analysis prove contrary to existing body of literature relative to the Liberian economy. The paper reviewed several literatures from various sources and regions to build the foundation for this work. The work used annual time series data of National debt (both domestic and foreign) and Gross domestic product (GDP) as well as annual data for revenue and expenditure for the periods under research. Data for national debt and GDP were obtained from the world development index, the World Bank and the international monetary fund while data for government revenue and government expenditure were both obtained from the fiscal outturn from the ministry of finance and development planning in Liberia. The paper established that there exists a long run relationship between national debt and economic growth in Liberia. It also established that there exist a bidirectional relationship between national debt and economic growth in Liberia.},
     year = {2020}
    }
    

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  • TY  - JOUR
    T1  - The Impact of National Debt on Economic Growth in Liberia: A Vector Error Correction Model
    AU  - Lester Zomatic Tenny
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    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
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    UR  - https://doi.org/10.11648/j.ijber.20200906.13
    AB  - This research investigated empirically the impact of the government of Liberia (GOL) debt on economic growth from 1970 to 2020. The findings from several studies in different regions of the world present mixed result and at times, controversial results on the impact of debt on the health of a country’s economy. Its objective was to ascertain whether debt, both domestically and foreign, has an impact on economic growth in Liberia over the period of 50 years. Despite the theoretical foundation that debt stymied economic growth, the result from the analysis prove contrary to existing body of literature relative to the Liberian economy. The paper reviewed several literatures from various sources and regions to build the foundation for this work. The work used annual time series data of National debt (both domestic and foreign) and Gross domestic product (GDP) as well as annual data for revenue and expenditure for the periods under research. Data for national debt and GDP were obtained from the world development index, the World Bank and the international monetary fund while data for government revenue and government expenditure were both obtained from the fiscal outturn from the ministry of finance and development planning in Liberia. The paper established that there exists a long run relationship between national debt and economic growth in Liberia. It also established that there exist a bidirectional relationship between national debt and economic growth in Liberia.
    VL  - 9
    IS  - 6
    ER  - 

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Author Information
  • Graduate School of Business, University of Liberia, Monrovia, Liberia

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