Investigating the dynamic impacts of public debt on economic growth in the Democratic Republic of Congo: a case of quantile on quantile regression

From the early 1980s until the late 2000s, the Democratic Republic of Congo (DRC, thereafter) was in severe debt distress, which resulted in debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. Surprisingly, the DRC's debt-to-GDP ratio increased significantly from around US$6.4 billion in 2019 to US$10.4 billion in 2022. With this in mind, we investigated the long-term impacts of public debt on growth by examining whether the debt-growth link is time-varying and state-dependent. Unlike the existing literature on country-specific studies that use parametric approaches, we employed the novel non-parametric Quantile-on-Quantile Regression (QQR) framework to uncover the non-linearity of the effect of public debt on growth using data covering the period 1970-2022. The results revealed asymmetric effects of public debt on growth across GDP growth quantiles. Specifically, we found positive impacts of public debt in lower quantiles (0.05-0.3) and middle quantiles (0.4-0.6) of GDP coupled with lower quantiles of Debt-to-GDP ratio (0.05-10). Moreover, the slope coefficient becomes negative in almost all quantiles of GDP coupled with the lower quantiles (0.2-0.3), middle quantiles (0.4-9.6), and higher quantiles (0.7-0.95) of Debt-to-GDP ratio. To check the robustness of our results, we used Markov Switching (MS) regression and the results were consistent with those of the QQR approach. Policy implications for robust growth in the DRC are provided.