Public debt–economic growth nexus: Case of South Africa

Public debt is defined as the total amount owed by the government. It is calculated as the total amount of international and local debts of the nation. Since the 2008 financial crisis, public debt has been increasing worldwide. This study seeks to examine the effects of public debt on economic growth in South Africa. South Africa is chosen because it is a developing country, and there has been less representation of developing countries in the studies on public debt and economic growth. The study employs quarterly time-series data from 1990 to 2020. Results from stationarity tests show that economic growth and public debt as a percentage of gross domestic product are integrated of the first order. The impulse response results from the vector autoregressive model show that a shock on public debt will cause a decrease in economic growth in the next period.