Morocco's Public Debt and Economic Growth: An Econometric Modelling Essay

Abstract

The objective of this article is to study the question of public debt in the case of Morocco. The issue revolves around the influence of public indebtedness on short-term, medium-term, and long-term economic growth.

Our main findings show that current growth is significantly influenced by the growth of previous years, specifically with a lag of two years. Therefore, an economic policy based on debt (domestic or external) has positive effects on the economy, particularly in stimulating the growth of gross domestic product (GDP). Similarly, we conclude that external and domestic debt is not a hindrance to the development of an economy lacking internal resources.

Indeed, based on the model estimation, we observed a positive relationship between the level of debt and per capita GDP growth, all else being equal. Consequently, the increase in per capita GDP moves in the same direction as debt.

The same holds true in the short term, where the outstanding amounts of domestic and external debt have a positive effect on economic growth, as it is statistically significant and grows in the same direction as per capita GDP.

The discussion of these results led us to conclude that there are multiple factors impacting the links between public debt and economic growth, which do not always allow us to confirm theoretical foundations through with empirical results.

Keywords: Public debt; economic growth; investment rate; degree of trade openness; terms of trade; VAR-VECM model.

JEL CLASSIFICATION : H63, O47, C51

 Paper type: Empirical research