An investigation of the relationship between public debt, government expenditure and revenue in Namibia
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Date
2019
Journal Title
Journal ISSN
Volume Title
Publisher
University of Namibia
Abstract
Given the raising concerns of fiscal sustainability and increases in debt burdens, this study investigates the relationship between government expenditure, government revenue and public debt by employing the data of these variables for the period 1990 to 2016, obtained from the Ministry of Finance (MOF). Due to the existence of cointegration, the error correction model (ECM) was employed to analyse the short- run dynamics. The ordinary least square (OLS) regression revealed a positive significant relationship between government expenditure and government revenue, but public debt was found to be statistically insignificant relative to government expenditure in the long run. All independent variables were found statistically significant and positively related to government expenditure in the short run. The negative sign of the residual in the estimated ECM indicates that any disequilibrium is corrected at an annual speed of 50.28 percent. The pair-wise Granger causality tests found an unidirectional causality from government expenditure to public debt. On the contrary, there is no evidence to support any causality between government expenditure and government revenue. The study recommends policy-makers to thoroughly review the fiscal policy and incorporate in it, an effective functional finance in order to save the economy, not only from perpetual budget deficits and accumulated borrowings, but also to avoid inflation or unemployment.
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration-Finance
Keywords
Public debt, Government expenditure, Revenue