The Macroeconomic Effects of Public Debt: An Empirical Analysis of Mozambique

REM Working Paper 029-2018

37 Pages Posted: 5 Mar 2018

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Yasfir Ibraimo

Instituto de Estudos Sociais e Economicos (IESE)

Date Written: February 22, 2018

Abstract

Public debt has been rising markedly over the years, which suggests an increase in public expenditure financed by debt instead of taxation. There is no consensus on the economic implications of borrowing to finance public expenditure. We assess empirically the macroeconomic effects of public debt for the case of Mozambique over the period of 2000Q1-2016Q4. We use a Vector Autoregression model to assess these effects through impulse response functions and variance decomposition. We conclude that debt service variables have much more negative effects on this economy than debt variables. Debt variables over the period of this study had no significant impact on the real output and the debt service component depressed the real output, increased the general price level and accounted for the depreciation on the domestic currency.

Keywords: Economic growth, External Debt, Domestic Debt, Total Debt Service, Variance Decomposition, Vector Autogression, Mozambique

JEL Classification: C32, E62, H63, O11, O55

Suggested Citation

Afonso, António and Ibraimo, Yasfir, The Macroeconomic Effects of Public Debt: An Empirical Analysis of Mozambique (February 22, 2018). REM Working Paper 029-2018 , Available at SSRN: https://ssrn.com/abstract=3128469

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics) ( email )

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

Yasfir Ibraimo

Instituto de Estudos Sociais e Economicos (IESE) ( email )

Av. Tomas Nduda, 1375
Maputo
Mozambique
+25821486043 (Phone)

HOME PAGE: http://www.iese.ac.mz/

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