International Journal of Research in Social Sciences
Year : 2018, Volume : 8, Issue : 8
First page : ( 68) Last page : ( 81)
Online ISSN : 2249–2496.

Exploring causal relationship between public debt and economic growth in a recessionary economy: The nigerian case

Waliu Otapo Toyin

Ph. D, Department of Banking and Finance. Adekunle Ajasin University, Akungba Akoko. Nigeria

Online published on 5 August, 2019.

Abstract

This study investigated the statistical significance of public debt on economic growth measured by gross domestic product (GDP) and explored the causal relationship between publicdebt and economic growth. Nigerian economic data between 1981 and 2012 obtained from the Central Bank of Nigeria statistical bulletin formed the study's data. Ordinary least square method was used to regress gross domestic product on immediate periods GDP, domestic debt, external debt, government final consumptionexpenditure, private consumption expenditure, exports and imports. The Granger causality test was employed for the test of causal relationship and the augmented Dickey Fuller unit root test was used for the diagnostic tests. Domestic debt had negative relationship with GDP and was found to granger cause GDP, increase in domestic debt stock can be adduced to be one of the reasons for the economic recession in Nigeria, but external debt had no causal relationship with economic growth, furthermore, public debt, that is domestic and external debt hadstatistical insignificant effect on GDP. Domestic debt should be properly managed and used productively while expansionary monetary and fiscal policies deployed to reverse recession in Nigeria.

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Keywords

Causality, public debt, economic growth, recession.

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