Revue Finance & marchés
Volume 9, Numéro 2, Pages 31-50
2022-09-21
Public Debt, Inflation And Their Interaction Effects On Economic Growth ( Case Of Middle Income Countries)
Authors : Zerarka Radhia . Belarbi Yacine . Bouchouk Soumia .
Abstract
The purpose of the study is to analyze the effect of public debt as an instrument of fiscal policy, inflation as an instrument of monetary policy (inflation), and the interaction between them on economic growth for middle-income countries, and then for `newly industrialized` and `least developed` sub-samples, during the period from 2000 to 2019, using statistic and econometric methods. However, our regressions focused on the fixed effects panel regression, as well as on the interactions in the fixed effects regression model developed by Schmidt-Catran, (2018). The results showed a negative impact of public debt and inflation on economic growth for middle-income countries, as well as negative effects of their interaction on economic growth, which means that debt can affect economic growth through its effect on inflation. However, these effects are different depending on a sample or sub-sample. The findings indicated that debt is not the appropriate fiscal tool, and a government should avoid using easy money to finance their debt, also inflation of these countries should be maintained below a certain level or use an inflation target to ensure its recovery.
Keywords
public debt ; inflation ; economic growth ; interaction effect ; middle-income countries.
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