Economic globalization and public debt in Sub‐Saharan Africa

Abstract

AbstractUsing data on Sub‐Saharan African countries and over the period from 1980 to 2017, this study empirically investigates the effects of economic globalization on public debt. By disentangling between the de jure and de facto aspects, the study uses second‐generation panel data tests to diagnose the cross‐sectional dependence, unit root and cointegration. The cross‐sectional error correction model with the estimation by dynamic common correlated effect technique, is used. We find that economic globalization as a whole increases the public debt in the short run while decreases it in the long run. For its dimensions, we show that financial globalization increases the public debt in the short and long run, while trade globalization increases the public debt in the short run but decreases it in the long run. Consideration of the de jure and de facto aspects of economic globalization shows that the de jure economic globalization does not influence government debt while its trade dimension reduces the short‐run public debt and its financial dimension increases the long‐run public debt. The de facto economic globalization and its dimensions increase public debt in the short run, while in the long run only the de facto trade globalization belittles the public debt.