MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
NGUYỄN VĂN BỔN
THE EFFECTS OF PUBLIC DEBT AND
INFLATION ON ECONOMIC GROWTH IN
DEVELOPING COUNTRIES
SUMMARY OF ECONOMIC DOCTORAL THESIS
HO CHI MINH CITY - 2016
The work was completed at
University of Economics Ho Chi Minh
The scientific instructor: Prof. Dr. Sử Đình Thành
Reviewer 1: ..................................................................................
Reviewer 2: ..................................................................………....
Reviewer 3: ..................................................................................
The thesis will be defensed in front of Thesis Scoring Board at
University of Economics Ho Chi Minh
at …. day …..month….year 2016
The thesis can be found at:
- Synthesis Scientific Library in Ho Chi Minh City
- Library of University of Economics Ho Chi Minh City
PUBLISHED SCIENTIFIC WORKS
1. Nguyen, V. B. (2016). The role of institutional quality in the
relationship between FDI and economic growth in Vietnam:
Empirical evidence from provincial data. The Singapore Economic
Review, Vol. 00, No. 0 (2016) 1650022.1-23 (23 pages).
2. Nguyen, V. B. (2015). The effects of public debt, inflation and
their interaction on economic growth in developing countries. Asian
Journal of Empirical Research 5(11), 221-236.
3. Nguyen, V. B. (2015). The relationship between public debt and
inflation in developing countries: Empirical evidence based on
difference panel GMM. Asian Journal of Empirical Research 5(9),
102-116.
4. Nguyen, V. B. (2015). Effects of Public Debt on Inflation in
Developing Economies of Asia: An Empirical Evidence Based on
Panel Differenced GMM Regression and PMG Estimation. The
Empirical Economics Letters 14(4), 341-351.
5. Nguyen, V. B. (2015). Effects of fiscal deficit and money M2
supply on inflation: Evidence from selected economies of Asia.
Journal of Economics, Finance & Administrative Science 20(38),
49–53.
6. Nguyen, V. B. (2014). Current Account and Fiscal Deficits:
Evidence of Twin Divergence from Selected Developing Economies
of Asia. Southeast Asian Journal of Economics 2(2), 33-48.
7. Nguyễn Văn Bổn & Nguyễn Minh Tiến (2014). Các nhân tố quyết
định dòng vốn FDI ở các nước Châu Á. Tạp chí Khoa học Trường
Đại học Cần Thơ, 31(2014), 124-131.
1
INTRODUCTION
1. The reason for study
The research background shows there no exists any study to
investigate the simultaneous effects of public debt, inflation, and
their interaction on economic growth for developing countries.
Therefore, the thesis “The effects of public debt and inflation on
economic growth in developing countries” has been chosen to
empirically analyse and investigate.
2. The aim for study
The thesis will focus on the following two objectives:
(1) Clearly determine the relationship between public debt and
inflation for developing countries.
(2) Empirically study the effects of public debt, inflation, and their
interaction on economic growth in these countries.
3. Research methodology
Clearly determine the relationship between public debt and
inflation for developing countries in the model and empirically
study the effects of public debt, inflation, and their interaction on
economic growth in these countries
Compare these effects for three samples: the whole sample, Asia,
and Africa.
4. Object and scope of the research
The relationship between public debt and inflation; the effects of
public debt, inflation, and their interaction on economic growth in 60
developing countries in Asia, American Latin, and Africa over the
period of 1990-2014.
5. Scientific significance of the thesis
2
Significant contribute to academic research on this topic and some
developing countries such as Vietnam.
Provide scientifically new findings on the simultaneous effects of
public debt, inflation, and their interaction on economic growth in
developing countries.
Set up the foundations to help policymakers to issue policies to
develop sustainably economy and avoid public debt crises.
6. Structure of the thesis
In addition to introduction, conclusion, appendix, and reference, the
structure of the thesis consists of 5 chapters.
CHAPTER 1
THEORY OVERVIEW
1.1 The foundations of public debt and inflation
1.1.1 Public debt theory
According to IMF (2010), public debt is known as the public sector’s
debt service. Accompanying is the definition about public sector,
consisting of government sector and public organisations. However,
according to WB (2002), public debt is all government debt and
government-guaranteed debt.
The economic impact of public debt
Nautet & Van Meensel (2011) note the impact of fiscal policy – and
then public debt – on economic growth is always a debate among
economists.
The short-term impact
In short-term, the instruments of fiscal policy used to consolidate
budget constraints will reduce economic growth. Indeed, empirical
studies show budget multipliers are positive.
The long-term impact
3
Contrarily, the long-term impact of fiscal consolidation to maintain
the public finance is positive. The impacts consist of reducing longterm interests due to restriction of government bond in the market
and dropping risk premiums. Furthermore, low interests form fiscal
consolidation will make public expenditure effectively or lower tax
burden.
The transfer mechanism
Nautet & Van Meensel (2011) state that there are some ways in
which increasing/decreasing public debt can have a negative/positive
impact on long-term growth. There are three main transfer
mechanisms: First, increasing public debt closely connects to
decreasing government saving, leading to decreasing national net
saving. Second, increasing public debt leads to high interest paying.
Finally, increasing public debt leads to risks of debt default, and
increases risk costs.
1.1.2 Inflation theory
Definition: According to Samuelson & Nordhaus (1989), inflation is
an increase in price level.
Inflation rate (year t) =
price level (year t) − price level (year t − 1)
x100
price level (year t − 1)
According to the website of World Bank, inflation is measured in
consumption price index, which describes annual change (%) about
the expenses that an average person has to pay for a basket of goods
and services in a time period (usually a year). Meanwhile, according
to the website of IMF, inflation measures high price level of a basket
of goods and services in a time period (usually a year).
The economic impact of inflation
- Impact on the distribution of income and wealth.
4
- Impact on the effectiveness of economy.
- Impact on the micro-economy.
1.1.3 The theory of relation between public debt and inflation
Adams et al. (2010) indicate the level of public debt depends upon
weighted borrowing interest rates, the value of domestic currency,
public debt ratio in foreign currency, growth rate, and primary fiscal
surplus. Particularly, ceteris-paribus, increasing/decreasing inflation
leads to decreasing/increasing public debt.
1.2 The analytic framework of public debt, inflation and growth
1.2.1 Public debt and macro-balances
The theory “vicious circle”
Through the analysis and arguments, Samuelson notes that
developing countries in “vicious circle” of poverty are too hard to
escape. To break this vicious circle, he claims it needs to have a lever
from outside, meaning that developing countries need the outside
resources of capital, technology, experts, and management,…
The two-gap model
Chenery & Strout (1966) presents “two-gap model” via analysing the
relationship between foreign capital and economic development. The
main idea of this model is that governments in developing countries
have to utilize domestic resources effectively and use foreign capital
(FDI and ODA capital) as a lever to narrow “investment-saving gap”
and “trade gap”
The three-gap model
The three-gap model is modified and developed from the two-gap
model by Bacha (1990), Solimano (1990), and Taylor (1994).
Accordingly, these researchers add “budget deficit gap” to the model
due to fiscal deficit of governments.
5
1.2.2 Public debt and inflation in the endogenous growth model
Public debt in the endogenous growth model: In his work, Barro
(1990) notes the increasing in public spending to supply public goods
and services as input for private sector’s production.
Inflation in the endogenous growth model: In their work, Chang &
Lai (2000) develop a theoretical model to investigate the impact of
inflation expectation in an endogenous monetary economy.
CHAPTER 2
LITERATURE ON THE EFFECTS OF PUBLIC DEBT AND
INFLATION ON ECONOMIC GROWTH
2.1 The relationship between public debt and inflation
Sargent & Wallace (1981) are the first researchers to suggest the
view of inflationary impact of public debt in indebted countries. This
view is mostly confirmed in empirical studies (Kwon et al., 2009;
Bildirici & Ersin, 2007; Ahmad et al., 2012; Nastansky et al., 2014).
Meanwhile, Davig & Leeper (2011) and Martin (2015) theoretically
analyse the impact of high public debt on inflation. Contrarily,
Akitoby et al. (2014) and Hilscher & Reis (2014) investigate the
impact of inflation on public debt.
2.2 Public debt, inflation and economic growth
2.2.1 Public debt and economic growth
In the strand of positive impact of public debt are the investigations
such as Moore & Thomas (2010), Egbetunde (2012), Al-Zeaud
(2014), Fincke & Greiner (2015b), Spilioti & Vamvoukas (2015).
In the strand of negative impact are studies for single countries such
as : Balassone et al. (2011), Bal & Rath (2014,), Akram (2015), Lee
& Ng (2015), Mitze & Matz (2015). For a group of countries:
6
Schclarek (2004), DiPeitro & Anoruo (2012), Panizza & Presbitero
(2012), Šimić & Muštra (2012), Calderón & Fuentes (2013), Szabó
(2013), Časni et al. (2014), Zouhaier & Fatma (2014), Eberhardt &
Presbitero (2015), Fincke & Greiner (2015a).
Relating to nonlinear growth impact of public debt, there are studies
for groups of developing countries (Maghyereh et al., 2003; Pattillo
et al., 2011; Kaur & Mukherjee, 2012; Craigwell et al., 2012; Wright
& Grenade, 2014), groups of developed countries (Cecchetti et al.,
2011; Checherita-Westphal & Rother, 2012; Minea & Parent, 2012;
Baum et al., 2013; Afonso & Alves, 2014; Mencinger et al., 2014;
Topal, 2014) and mixing groups (Rogoff & Reinhart, 2010; Real et
al., 2014; Égert, 2015).
2.2.2 Inflation and economic growth
Investigations find the positive growth impact of inflation: Mallik &
Chowdhury (2001), Xiao (2009), Raza et al. (2013).
Investigations find the negative growth impact of inflation: Gillman
et al. (2004), Gillman & Harris (2008), Bittencourt (2012), Kasidi &
Mwakanemela (2012), Kaouther & Besma (2014), Bittencourt et al.
(2015), Samimi & Kenari (2015).
Studies find the threshold growth impact of inflation for single
countries: Mubarik & Riazuddin (2005), Risso & Carrera (2009),
Marbuah (2010), Ayyoub et al. (2011), Fakhri (2011), Mohanty et al.
(2011), Bawa & Abdullahi (2012) and Jayaraman et al. (2013). For
groups of developing countries (Bick, 2010; Ghazouani, 2012;
Seleteng et al., 2013; Vinayagathasan, 2013; Baglan &Yoldas, 2014;
Thanh, 2015), groups of developed countries (Omay & Öznur Kan,
2010), and mixing groups (Khan & Senhadji, 2001; Burdekin et al.,
2004; David et al., 2005; Li, 2006; Pollin & Zhu, 2006; Vaona &
7
Schiavo, 2007; Espinoza et al., 2010; López-Villavicencio &
Mignon, 2011; Trupkin & Ibarra, 2011; Jha & Dang, 2012; Kremer
et al., 2013).
2.2.3 The effects of public debt, inflation, and their interaction on
economic growth
There are two studies (Taghavi, 2000; Kočner, 2015) to investigate
the effects of public debt on inflation and growth while the
remaining ones (Chudik et al., 2013; Lopes da Veiga et al., 2015)
study the impacts of public debt and inflation on growth.
2.3 Some comments and research gap
Through literature review from 2000 onwards, the author of the
thesis recognises there is no studies to investigate the simultaneous
effects of public debt, inflation, and their interaction on growth.
Although Akitoby et al. (2014) do not clearly show the interaction
between public debt and inflation, they demonstrate the impact of
this variable. Therefore, this interaction can have a certain impact on
growth because a shock of high inflation have both a direct impact
(from this shock) and an indirect impact (via the interaction) on
growth. It is a research gap for the topic on growth impacts of public
debt and inflation in this thesis.
CHAPTER 3
RESEARCH MODEL AND METHODOLOGY
3.1 The empirical framework
The framework is started by the traditional production function
Cobb-Douglas. Based on the theoretical and empirical studies, then
this function is changed with the following result:
8
𝑌
𝑌
𝑌
( ) −( )
= 𝛾0 + 𝛾1 ( )
+ 𝛾2 (𝐷𝐸𝐵𝑇)𝑖,𝑡 + 𝛾3 (𝐼𝑁𝐹𝐿)𝑖,𝑡
𝐿 𝑖,𝑡
𝐿 𝑖,𝑡−1
𝐿 𝑖,𝑡−1
𝑃𝐼𝑁𝑉
+ 𝛾4 (𝐷𝐸𝐵𝑇 ∗ 𝐼𝑁𝐹𝐿)𝑖,𝑡 + 𝛾5 (
) + 𝛾6 (𝐿𝐴𝐵𝑂)𝑖,𝑡
𝐺𝐷𝑃 𝑖,𝑡
𝐵𝑅𝐸𝑉
+ 𝛾7 (
) + 𝛾8 (𝑇𝐸𝐿𝐸)𝑖,𝑡 + 𝛾9 (𝑂𝑃𝐸𝑁)𝑖,𝑡 + 𝜂𝑖 + 𝜉𝑖,𝑡
𝐺𝐷𝑃 𝑖,𝑡
3.2 Research model and methodology
3.2.1 The relationship between public debt and inflation
∆𝐼𝑁𝐹𝑖𝑡 = 𝛼𝑖𝑡 + 𝛽0 𝐼𝑁𝐹𝑖𝑡−1 + 𝛽1 𝐷𝐸𝐵𝑖𝑡 + 𝑍𝑖𝑡 𝛽′2 + 𝜂𝑖 + 𝜉𝑖𝑡
∆𝐷𝐸𝐵𝑖𝑡 = 𝛼𝑖𝑡 + 𝛽0 𝐷𝐸𝐵𝑖𝑡−1 + 𝛽1 𝐼𝑁𝐹𝑖𝑡 + 𝑍𝑖𝑡 𝛽′2 + 𝜂𝑖 + 𝜉𝑖𝑡
Where ηi ~ iid(0, ση); ζit ~ iid(0, σζ); E(ηi ζit) = 0. INF is inflation and
DEB is public debt; Zit is a set of control variables; ηi is an
unobserved time-invariant, country-specific effect and ζit is an
observation-specific error term.
3.2.2 The effects of public debt, inflation, and their interaction on
economic growth
𝑌𝑖𝑡 − 𝑌𝑖𝑡−1 = 𝛼𝑖𝑡 + 𝛽0 𝑌𝑖𝑡−1 + 𝑋𝑖𝑡 𝛽1′ + 𝑍𝑖𝑡 𝛽2′ + 𝜂𝑖 + 𝜉𝑖𝑡
Where ηi ~ iid(0, ση); ζit ~ iid(0, σζ); E(ηi ζit) = 0. Yit is real GDP per
capita; Xit is interest variables (public debt, inflation and interaction);
Zit is control variables (private investment, labor force, government
revenue, infrastructure, and trade openness); ηi is an unobserved
time-invariant, country-specific effect and ζit is an observationspecific error term.
3.2.3 The estimation method of difference GMM Arellano-Bond
There are some serious problems of econometrics from estimating
empirical equations. So, the thesis uses the estimation method of
difference GMM Arellano-Bond (1991) which are firstly developed
by Holtz-Eakin et al. (1988).
3.3 Research data and selection of variables
9
3.3.1 Research data
Cross-sections and time series are extracted to accommodate
the panel data of 60 developing countries over period of 1990 2014 from World Bank (World Development Indicators) and
International Monetary Fund (World Economic Outlook).
Some missing values of the data set in some countries are filled
with reference to www.tradingeconomics.com
3.3.2 Selection of variables
In short, the thesis determines and calculates the variables in the
empirical model as follows:
lGDP: a real gross domestic product per capita, proxy for the
economic growth of a country. This variable is used in form of
natural logarithm.
PDEB: public debt, a share of GDP (%).
INFL: inflation per year (%).
PINV: private investment, a share of GDP (%).
LABO: labor force, a ratio between working age people (15-64)
and total population of a country (%).
REV: government revenue, a share of GDP (%).
TELE: infrastructure development. The infrastructure can be
measured in some different ways such as the length of high way
per square kilometer (Du et al., 2008), the length of railway
(Kuzmina et al., 2014) or the fixed telephone subscriptions per
100 people (Bissoon, 2011; Nguyen, 2015). In this study, it is the
fixed telephone subscriptions per 100 people.
OPEN: trade openness, a share of GDP (%).
CHAPTER 4
10
THE RELATIONSHIP BETWEEN PUBLIC DEBT AND
INFLATION IN DEVELOPING COUNTRIES
4.1. Introduction
The main purpose of this chapter is to apply the estimation method of
difference GMM to empirically investigate the relationship between
public debt and inflation for 60 developing countries over the period
of 1990-2014.
4.2 The variables in the empirical equation
Main variables: Public debt (PDEB) and Inflation (INFL). Control
variables: Economic growth (lGDP), Labor (LABO), Government
revenue (REV), Infrastructure (TELE), Trade openness (OPEN). The
matrix of correlation coefficients is presented in Table 4.1.
Table 4.1 The
matrix of correlation coefficients
PDEB
PDEB
1.000
INFL
.031
INFL
lGDP
PINV
LABO
REV
-.24
-.07**
1.000
-.10
***
-.025
.185***
1.000
LABO
-.16
***
-.041
-.33
***
-.10***
1.000
REV
-.16***
.011
.319***
.217***
-.056*
-.023
.760
***
.088
***
-.16
***
.223***
.268
***
.248
***
-.10
***
***
PINV
TELE
-.16
OPEN
Note:
***
-.023
*** **
,
and
OPEN
1.000
***
lGDP
TELE
-.048
*
1.000
.424
1.000
.111***
1.000
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
4.3 The results and discussion
4.3.1 The Granger relationship between public debt and inflation
Table 4.2 Westerlund co-integration test for the whole sample
11
Dependant variable: Inflation (Lag = 2)
Indep. variable
Gt
Public debt
Gα
-4.602
Note: ***, ** and
*
***
-24.772
Pt
***
-67.926
Pα
***
-47.660***
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.3 Granger test from inflation to public debt for the whole
Dependant variable: Inflation
Statistics F = 312.19***
Indep. variable
Coef
Std. Err
p-value
Inflation (-2)
0.000
Inflation (-1)
Public debt (-2)
Public debt (-1)
Note:
,
0.973
0.193
0.005
0.000
0.062
***
0.014
0.000
***
0.020
0.003
0.015
0.082
-0.062
0.026*
Public debt
*** **
0.005
***
and
*
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.4 Granger test from public debt to inflation for the whole
Dependant variable: Public debt
Statistics F = 1101.92***
Indep. variable
Coef
Std. Err
p-value
Public debt (-2)
-0.106***
0.029
0.000
Public debt (-1)
***
0.030
0.000
1.016
Inflation (-2)
-0.003
0.011
0.786
Inflation (-1)
-0.028
0.018
0.110
*
0.069
0.082
Inflation
Note:
0.120
*** **
,
and
*
denote the significance at 1%, 5% and 10% respectively
12
Source: Stata software
Table 4.5 Westerlund co-integration test for Asia
Dependant variable: Inflation (Lag = 2)
Indep. variable
Gt
Public debt
Note: ***, ** and
Gα
-5.407
*
***
-27.889
Pt
***
-79.123
Pα
***
-102.512***
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.6 Granger test from inflation to public debt for Asia
Dependant variable: Inflation - Statistics F = 454.98***
Indep. variable
Inflation (-2)
Inflation (-1)
Coef
Std. Err
p-value
-0.005
0.004
0.192
0.004
0.000
0.189
***
Public debt (-2)
-0.043
0.047
0.358
Public debt (-1)
0.021
0.078
0.783
Public debt
0.038
0.053
0.478
Note: ***, ** and
*
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.7 Granger test from public debt to inflation for Asia
Dependant variable: Public debt - Statistics F = 529.68***
Indep. variable
Coef
Std. Err
p-value
Public debt (-2)
-0.351
***
0.042
0.000
Public debt (-1)
1.197***
0.043
0.000
Inflation (-2)
0.000
0.004
0.906
Inflation (-1)
-0.006
0.010
0.513
13
Inflation
0.036
Note: ***, ** and
*
0.050
0.478
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.8 Westerlund co-integration test for Africa
Dependant variable: Inflation (Lag = 2)
Indep. variable
Public debt
Note: ***, ** and
*
Gt
Gα
Pt
Pα
-4.484***
-25.402***
-17.131***
-16.007***
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.9 Granger test from inflation to public debt for Africa
Dependant variable: Inflation - Statistics F = 32.07***
Indep. variable
Coef
Std. Err
p-value
Inflation (-2)
0.005
Inflation (-1)
Public debt (-2)
Public debt (-1)
Note:
,
0.836
0.260
0.039
0.000
0.076
***
0.019
0.000
***
0.027
0.003
0.020
0.113
-0.084
Public debt
*** **
0.024
***
0.032
and
*
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.10 Granger test from public debt to inflation for Africa
Dependant variable: Public debt - Statistics F = 485.10***
Indep. variable
Public debt (-2)
Public debt (-1)
Coef
Std. Err
p-value
**
0.047
0.058
***
0.046
0.000
-0.090
1.012
14
Inflation (-2)
0.042
0.060
0.480
Inflation (-1)
-0.225**
0.100
0.026
0.192
0.121
0.113
Inflation
Note:
***, **
*
and
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
4.3.2 The relationship between public debt and inflation in
developing countries for the whole sample
The estimated results in Table 4.11 show public debt, economic
growth, and private investment have positive impacts while labor
force, infrastructure, and trade openness have negative effects on
inflation.
Table 4.11 The effect of public debt on inflation for the whole sample
Dependant variable: Δ Inflation
Model 1
Inflation (-1)
Std.Err
Coef
Std.Err
Coef
Std.Err
-1.27***
0.031
-1.28***
0.031
-1.28***
0.031
0.157
**
0.155
**
0.160
***
0.457
0.403
GDP per capita
1.034
**
Private investment
6.568***
Labor force
Model 3
Coef
**
Public debt
Model 2
-16.67
*
0.388
0.405
0.416
1.312
***
0.457
1.301
2.091
6.045***
2.052
5.869***
2.093
9.111
-22.13
**
9.776
**
9.888
-3.146
**
-1.78***
Gover. revenue
-21.48
0.365
Infrastructure
-1.85***
Trade openness
0.379
1.502
-3.091
1.506
0.366
-1.82***
0.383
Obs
1006
1006
1006
AR(2) test
0.349
0.165
0.165
0.222
0.266
0.223
Sargan test
Note:
*** **
,
and
*
0.893
**
denote the significance at 1%, 5% and 10% respectively
15
Source: Stata software
Table 4.12 The effect of inflation on public debt for the whole sample
Dependant variable: Δ Public debt
Model 1
Public debt (-1)
Inflation
Std.Err
Coef
Std.Err
Coef
-0.548***
0.033
-0.54***
0.034
-0.54***
0.033
0.233
-0.63
***
0.237
**
0.239
***
0.091
-0.43
***
0.123
0.609
2.246***
0.597
3.428
2.407
**
***
0.086
-0.31
2.215***
0.601
2.267***
0.433
***
-0.345
Private
Model 3
Coef
-0.598
GDP per capita
Model 2
-0.554
Std.Err
investment
Labor force
Gover. revenue
-2.662
***
Infrastructure
0.599***
Trade openness
Obs
AR(2) test
Sargan test
Note:
*** **
,
and
*
0.137
-2.68
***
0.438
-2.43
0.464
-0.762
0.594
-0.447
0.623
0.610***
0.139
0.623***
0.137
826
826
826
0.955
0.923
0.853
0.125
0.155
0.147
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
4.3.3 The relationship between public debt and inflation in
developing countries of Asia and Africa
Table 4.13 The effect of public debt on inflation for Asia
Dependant variable: Δ Inflation
Model 1
Coef
Inflation (-1)
-1.31
***
Std.Err
0.044
Model 2
Coef
-1.31
***
Std.Err
0.044
Model 3
Coef
-1.31
***
Std.Err
0.044
16
Public debt
0.712*
0.376
0.721*
0.376
0.654*
0.383
GDP per capita
-0.205
0.232
-0.130
0.259
-0.043
0.280
Private investment
2.842
2.352
2.838
2.348
2.711
2.335
-3.275
5.048
-4.072
5.110
3.683
2.491
2.998
2.620
-1.705
2.165
Labor force
Gover. revenue
3.980
2.452
Infrastructure
Trade openness
-1.252
**
Obs
0.537
-1.286
**
0.538
-1.286
**
0.534
391
391
391
AR(2) test
0.289
0.277
0.243
Sargan test
0.236
0.204
0.169
Note: ***, ** and
*
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.14 The effect of inflation on public debt for Asia
Dependant variable: Δ Public debt
Model 1
Public debt (-1)
Inflation
GDP per capita
Model 2
Coef
Std.Err
Coef
Std.Err
Coef
-0.51***
0.039
-0.51***
0.040
-0.51***
0.040
0.093
**
0.095
*
0.098
-0.20
***
0.046
-0.10
***
0.328
1.296
6.125***
1.366
0.157
***
0.162
-0.212
-0.19
**
***
0.039
-0.197
-0.20
***
0.043
Private investment
Labor force
Gover. revenue
5.897***
-0.51
***
1.199
6.265***
0.153
***
Infrastructure
Trade openness
Obs
AR(2) test
Model 3
-0.49
0.202
-0.120
*
0.071
-0.121
0.252
*
0.072
-0.189
-0.47
Std.Err
0.188
-0.122
0.255
*
347
347
347
0.675
0.695
0.686
0.072
17
Sargan test
Note:
*** **
,
0.205
and
*
0.208
0.162
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.15 The effect of public debt on inflation for Africa
Dependant variable: Δ Inflation
Model 1
Coef
Inflation (-1)
-0.73
Public debt
0.091
GDP per capita
Std.Err
***
0.034
***
0.031
0.100
Private investment
0.464
Labor force
0.117
**
0.222
1.077
1.074
Model 2
Coef
-0.73
Std.Err
***
0.090
0.034
***
0.031
0.102
0.455
0.118
**
0.224
1.053
1.079
Gover. revenue
Infrastructure
Trade openness
-0.134
Obs
AR(2) test
Sargan test
Note:
*** *
, * and
*
0.129
Model 3
Coef
-0.73
Std.Err
***
0.034
***
0.033
0.090
0.103
0.455
0.118
**
0.226
1.051
1.088
-0.003
0.171
-0.700
2.798
-0.702
2.802
-0.127
0.132
-0.126
0.138
437
437
437
0.556
0.561
0.561
0.932
0.910
0.881
denote the significance at 1%, 5% and 10% respectively
Source: Stata software
Table 4.16 The effect of inflation on public debt for Africa
Dependant variable: Δ Public debt
Model 1
Public debt (-1)
Model 2
Model 3
Coef
Std.Err
Coef
Std.Err
Coef
Std.Err
-0.57***
0.053
-0.57***
0.055
-0.56***
0.053
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