IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH IN THE PUBLIC SECTOR IN KENYA: A CRITICAL REVIEW OF LITERATURE.

Abstract

The main purpose of this paper was to review the literature on the how public debt components influence economic growth in the public sector. The specific objectives of the review were to identify trends in published literature on public debt components and economic growth in the public sector; identify major conflicts and or inconsistencies in theory, concepts, methodology, findings and conclusions; identify the gaps and flaws in research within the context of public debt components and economic growth; and build propositions based on identified thematic areas. Literature on public debt components adopted to influence economic growth in the public sector was collected and analyzedfrom secondary sources. These sources included books, research publications, academic publications and journals. The general trend focused on public debt components that are important in influencing economic growth in the public sector.  Major conflicts in theory, concepts and methodology were identified and documented.  The gaps revealed that majority of publications reviewed were not grounded in theory for their studies. The literature too revealed a lack of agreement on the overall impact of public debt components on economic growth. A conceptual gap was noted in which all the research publications ignored the impact of intervening variables on the relationship between the predictor variables and the output variables. Also most publications considered public debt components as first order constructs, leaving a gap on what type public debt components to guide and help prioritization of the components during adoption and none of the reviewed studies has investigated the influence of a moderating variable on the relationship between the public debt components and economic growth. From the reviewed literature, the study findings led to the following prepositions: To examine the effect internal and external debts on economic growth in the public sector; To assess the impact of Productive and unproductive Debt on economic growth in the public sector; To evaluate the effect of Compulsory and Voluntary Debt on economic growth in the public sector; To assess the impact of Redeemable and Irredeemable Debt on economic growth in the public sector. This study recommends further research to compare and ascertain the strength of the relationship between the thematic areas and economic growth in the public sector; further research is also required to establish the influence of public debt on economic growth in the public sector.  Another area that requires further research according to the reviewed literature is on assigning weights to public debt components to assist the country.