The Effect of Public Debt and Government Expenditure on Industrial Sector Performance

Abstract

This study examines the effect of public debt and government expenditure on industrial sector performance. Data from 1981 to 2023 was employed and Autoregressive Distributive Lag model was employed in analyzing the short- and long-run relationships among the variables. The study reveals significant short run and long-run relationship among the variables. However, the relationship between all the variables were negligible in the short run and also negligible for debt in the long run. In the long run, domestic debt, external debt and recurrent expenditure all have negative effect on industrial sector performance while recurrent expenditure affect it positively.  In the long run all the variables exert positive impact on industrial sector performance except recurrent expenditure. The study therefore recommends that any form of debt obtained by government should be directed at developing the industrial sector of the economy. Capital expenditure should also be geared toward industrial sector development. Policy makers should ensure that the amount set aside for the sectors development are judiciously implemented.