Assessing Public Debt and Economic Growth Nexus in Cote D’ivoire Using the Threshold Autoregressive Approach

Abstract

This study aims to highlight the empirical relationship between public debt and economic growth in Cote d’Ivoire using the Threshold Autoregressive (TAR) model over the period 1970-2018. The results obtained in the short run shed light on the no relationship between public debt and economic growth. In the long run, there is a bi-directional Granger causality between public debt and the sustainability of economic growth. Moreover, the non-linearity between the variables of interest has been explored and the results show the presence of a threshold effect: beyond 48.03 percent of GDP, any increase in public debt by 1% should reduce economic growth by 0.28%. Thus, the study questions the relevance of the West African Economic and Monetary Union (WAEMU) criterion set at 70% of GDP.