Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 344

Full Length Research Paper

An econometric analysis: Is there an optimal external debt threshold for Guinea?

Abdoul Aziz Diallo
  • Abdoul Aziz Diallo
  • National Directorate of Economic Studies and Forecasting of the Ministry of Economy and Finance, Republic of Guinea.
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Felix Fofana NZue
  • Felix Fofana NZue
  • Department of Economics and Management, Université Félix Houphouët Boigny Abidjan, Côte d’Ivoire.
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  •  Received: 20 August 2021
  •  Published: 31 July 2021

Abstract

This study aimed to determine the threshold level of public external debt-to-GDP ratio for Guinea and compared it with the current evolution of public debt. The authors used an autoregressive distributed lag (ARDL) approach to test the hypothesis of long-term relationship among the variables of interest and the data used ranged from 1990 to 2018. The results revealed that External debt-to-GDP ratio and per capita GDP are positively related. Moreover, the null hypothesis of no co-integration was rejected. Thus, external debt-to-GDP ratio and economic growth as well as other variables are co-integrated. Moreover, the debt variable had significant non-linear effects on economic growth and indicated that there exists an optimal level of external debt-to-GDP ratio that stood at 25.2%. Compared to its current level which stood at 21.7%, the country still has some borrowing margin. In the short run external debt-to-GDP ratio has no significant effect on the country’s economic performance.

 

Key words: External debt, Economic growth, autoregressive distributed lag (ARDL), Guinea.