Non-linear effects of public debt on economic growth in Southern Africa Development Community (SADC) countries

Over the years, public debt has been an important source of funding the growth and development projects for developing countries. As a result, public debt size in these countries has risen substantially over the past decades. In particular, sub-Saharan African countries' public debt levels have reached unprecedented levels in recent decades, thereby, making the debate on its role in the growth process particularly important. This study contributes to the public debt and economic growth nexus by investigating the non-linear effects of public debt on economic growth in Southern African Development Community (SADC) with the aid of a non-linear autoregressive distributed lag model (NARDL) within a panel framework. Results from the study confirm the existence of non-linearity between public debt and economic growth in the long run. This indicates that public debt drives growth before counteracting it upon reaching the threshold level. The results show that public debt threshold stands at 57% of GDP for the SADC in the long run. The study concludes that public debt is an important expansionary fiscal policy in SADC if put into productive use and contained within an optimal range.