A Dynamic Panel Analysis of the Impact of Fiscal Discipline and Size of Government on Economic Growth in Sub-Saharan Africa
DOI:
https://doi.org/10.51137/wrp.ijarbm.551Keywords:
Fiscal Discipline, Government Size, Economic Growth, Sub-Saharan Africa, System GMMAbstract
This study examines the impact of fiscal discipline and government size on economic growth in Sub-Saharan Africa (SSA). Despite ongoing economic reforms, SSA countries continue to face macroeconomic instability, high public debt, and inconsistent growth patterns. Using a dynamic panel data approach with the System Generalized Method of Moments (SGMM), the study assesses how fiscal discipline measured by debt-to-GDP ratio and government size proxied by public expenditure affect economic performance. The findings reveal that fiscal discipline does not have a statistically significant impact on economic growth in SSA, suggesting that weak institutional frameworks and inefficient public financial management undermine the benefits of fiscal prudence. Conversely, government size negatively and significantly affects economic growth, indicating that excessive public sector expansion may crowd out private investment and reduce economic efficiency. These results highlight the need for policy reforms that enhance public sector efficiency, improve fiscal management, and promote a more balanced approach to government intervention in SSA economies. The study contributes to the ongoing debate on optimal fiscal policies for sustainable economic development in developing regions.
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