Author(s)

Kacou Firmin Croi¹, Adama Diaw²

¹Department of Economics, Faculty of Economics Development, Alassane Ouattara University, Bouake, Ivory Coast.
²Department of Economics, Faculty of Economics and Management, Gaston Berger University, Saint-Louis, Senegal.

This paper examines the role of institutional quality in the relationship between debt and growth in the West African Economic and Monetary Union (WAEMU) over the period 1980-2019. We used a combination of models. The model of Hansen (1999) and the models of Brambor et al., (2006) and that of Esarey & Sumner (2018). The results of the direct relationship between debt and growth indicate a debt threshold of 54.50% of GDP. The results also show that, below this threshold, debt has a positive effect on growth, but, above that threshold, the effect is negative. The results also show that taking into account the quality of institutions in the relationship between debt and growth has a positive and significant net effect on growth. This result highlights the important and essential role of the quality of institutions in debt management.

Debt, Institutions, Economic Growth, Threshold

Croi, K. and Diaw, A. (2020) Debt and Growth in West African Economic and Monetary Union Countries (WAEMU): The Role of Institutional Quality. Modern Economy, 11, 1505-1521. doi: 10.4236/me.2020.119107.