The impact of domestic and foreign public debt on economic growth: Empirical evidence from Zimbabwe

Abstract

This paper applies the autoregressive distributed lag (ARDL) approach to examine the impact of public debt (domestic and foreign) on economic growth in Zimbabwe for the period from 1970 to 2017. The study adds to the ongoing public debt-economic growth debate by testing the impact of the aggregated and disaggregated public debt on economic growth. The empirical results reveal that the impact of public debt on economic growth in Zimbabwe is negative, irrespective of whether public debt is aggregated or disaggregated, and irrespective of the type of debt – domestic or foreign. The study results further reveal that domestic public debt is more disastrous to the Zimbabwean economy than its foreign counterpart. These results are found to apply regardless of whether the regression analysis is performed in the short run or in the long run. The study recommends, among others, for the repealing of the government overdraft facility with the central bank.