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Abstract
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Article Information:
External Debt, Internal Debt and Economic Growth Bound in Nigeria using a Causality Approach
D. Amassoma
Corresponding Author: Amassoma J. Ditimi
Submitted: 2011 April, 12
Accepted: 2011 June, 15
Published: 2011 July, 30 |
Abstract:
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The study examined the causal nexus between external debt, domestic debt and economic growth
in Nigeria between 1970 and 2009 using a Vector Autoregressive (VAR) and a Vector Error Correction (VEC)
models. The variables used in the study were tested for stationarity using the Augmented Dickey Fuller and
Philip Perron test. The result showed that the variables are stationary at first differencing. Co-integration test
was also performed and the result revealed the absence of co-integration between domestic debt and economic
growth while the result also revealed the presence of co-integration between external debt and economic
growth. The co-integration results determined the appropriateness of methodological test for causality. The
findings of the VAR model revealed that there is a bi-directional causality between domestic debt and economic
growth while that of the VEC model revealed a unidirectional causality from economic growth to external debt
in Nigeria. The study recommends that government should rely more on domestic debt in stimulating growth
than on external debt.
Key words: Causality, economic growth, external debt, internal debt, VAR, VEC,
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Cite this Reference:
D. Amassoma, . External Debt, Internal Debt and Economic Growth Bound in Nigeria using a Causality Approach. Current Research Journal of Social Sciences, (4): 320-325.
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ISSN (Online): 2041-3246
ISSN (Print): 2041-3238 |
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