The determinants of public debt in the Gambia: Estimates using the autoregressive redistributed lag (ARDL) bound cointegration technique

Abstract

The main objective of this paper is to examine the key determinants of public debt in the Gambia. To achieve this objective, the Autoregressive Distributed Lag (ARD) method was employed to examine the impact of short-run and long-run selected macroeconomic variables as well as a government effectiveness variable in determining the public debt level of The Gambia during the period 2000 to 2019. The results reveal that trade openness and gross fixed capital formation have an increasing impact on the Gambia's public debt in the long-run. On the other hand, GDP growth, official exchange rate, and the government effectiveness variables have been found to have decreasing effects on public debt levels in the long-run. However, none of the variables show a significant relationship with public debt of levels of The Gambia in the short-run. Given these findings, it is recommended for the Government of the Gambia to improve the country's governance effectiveness, in particular, as weak government institutions was found to be one of the main drivers of the country's public debt in the long-run.