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Impact of Public Debt on Economic Growth: A Quantile Regression Approach

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  • Chen Kong San
  • Lee Chin

Abstract

This study aimed at investigating the nexus between government debt and its determinants in the context of sustainable economic growth for 97 countries over the period from 2004 to 2018 by employing a panel data quantile regression and comparing it across a fixed-effects model and a generalized method of moments (GMM) model. The different touches of debt on economic growth were analysed. The quantile regression estimates revealed that government debt has various impacts on economic growth, relying on the degree of economic performance. Government debt negatively affects economic growth across all the quantiles. More interestingly, the quantile regression estimates indicated that in countries with a very low level of real GDP per capita growth, government debt has a stronger pernicious effect on economic growth compared to upper-middle and high-income countries. Hence, our results provided insightful information for policy makers in designing appropriate fiscal policies particularly for low- and lower- middle-income countries to mitigate the negative effect on economic growth, and it should be maintained at a low and reasonable level to promote sustainable economic growth. JEL Classification: E61, E62, E63, H63, O4, O40

Suggested Citation

  • Chen Kong San & Lee Chin, 2023. "Impact of Public Debt on Economic Growth: A Quantile Regression Approach," South Asian Journal of Macroeconomics and Public Finance, , vol. 12(2), pages 250-278, December.
    • Handle: RePEc:sae:smppub:v:12:y:2023:i:2:p:250-278
    DOI: 10.1177/22779787231207218
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    More about this item

    Keywords

    Debt; economic growth; macroeconomic; quantile regression;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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