How Does Public Deficit Affect Public Investment in Senegal?
DOI:
https://doi.org/10.47604/jpid.269Keywords:
nonlinear, public deficit, public investment, debtAbstract
Purpose: This paper proposes an assessment of the non-linear relationship between public deficit and public investment in debt situation.
Methodology: We use an endogenous growth model, with productive public spending, that we test empirically using the interaction model of Brambor et al. (2002), over the period 1980-2015, in Senegal.
Results: The results of the estimates show a change in the regime of the relationship between public investment and public deficit for public debt level equal to 80% of GDP. When public debt is below this threshold, any increase in the deficit has an expansive effect on public infrastructure spending. When public debt is above the threshold of 80% of GDP, an increase in the deficit has a recessive effect on public investment.
Policy recommendation: An important contribution of this study is to show that the PCSCS implemented in the WAEMU zone cannot register only in a nominal sense to inking with the euro. The budgetary rules laid down in the Stability Pact should be studied in depth. The study would benefit from further study. One of the extensions of this study would be to determine the impact of this debt threshold of 80% on long-term economic growth in Senegal.
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