Public debt and unemployment in Sub-Saharan Africa: the role of institutional framework

Literature has documented extensive works on the relationship between public debt and unemployment. However, there is no documented literature on the role of institutions in the relationship between public debt and unemployment. The primary aim of this study was to assess the role of institutional quality in the relationship between public debt and unemployment in the SSA region. The study used annual panel data of 36 selected SSA economies covering 1996–2020. The System Generalised Method of Moments (SGMM) was used as the main empirical estimation tool. The findings from the study indicated that public debt acquisition is not contributing to reducing the unemployment situation in the SSA region. It was also revealed that institutional quality serves as a good moderator which ensures the inverse relationship between public debt and unemployment. The research concluded that debts acquired are not channelled to employment creation in the SSA region. However, with stronger institutions, debts can be channelled to create employment. It is, therefore, recommended that governments in SSA should comprehensively improve institutional quality before strides could be made in effectively utilising debts to create employment.