Causal Evaluation of Public Debt Sustainability and Intergenerational Equity in West Africa
Abstract
This study investigated the existence of causal relationship between public debt sustainability variables and intergenerational equity West African from 1990 to 2020. The study employed ex-post facto research design using secondary annual panel data obtained from various publications of International Monetary Fund (IMF) and the World Development Indicators (WDI) for the periods 1990-2020. The data were analyzed using Panel Granger Causality techniques. Results from the study revealed a unidirectional causal relationship running from total reserves to tax revenue as well as trade openness to total reserves, no causal relationship between public external debt, exchange rate, tax revenue and foreign reserve and a bidirectional causality between trade openness and public external debt which implies a two-way relation between trade openness and public external debt. Hence fiscal policy authorities in West Africa, particularly the debt management offices (DMOs), should prioritize prudent debt management and adequate reserve accumulation to promote tax smoothing., sufficient reserve accumulation, and careful balance between borrowing and reserve preservation. Striking the right balance would contribute to debt sustainability, currency stability, investor confidence, and long-term economic resilience.
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