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The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from the ARDL Bound Testing Approach

Author

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  • Kazi Mezbah Uddin Ahamad*

    (Lecturer, Department of Economics, Mawlana Bhashani Science and Technology University, Tangail-1902, Bangladesh)

  • Md. Mominul Islam

    (Department of Economics, Mawlana Bhashani Science and Technology University, Tangail-1902, Bangladesh)

Abstract

Public debt is intended to bridge the gap between domestic savings and investment. This paper examines the effect of public debt on economic growth in Bangladesh using autoregressive distributed lag bound testing approach to cointegration. It finds a negative relationship between public debt and economic growth both in the short-run and the long-run. That is, a significant rise in the public debt in Bangladesh appears to be a burden for the economic growth controlling for other determinants of growth. The findings suggest that funds obtained through public debt are not utilized in the productive economic avenues which may improve the growth scenario in Bangladesh. Also, the adverse effect exerted by public debt may further be responsible for a reduction in investment and slower growth of capital stock, which eventually can hamper the labour productivity growth in the country in long run.

Suggested Citation

  • Kazi Mezbah Uddin Ahamad* & Md. Mominul Islam, 2020. "The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from the ARDL Bound Testing Approach," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 6(5), pages 87-95, 05-2020.
  • Handle: RePEc:arp:ijefrr:2020:p:87-95
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    Cited by:

    1. Subrata Deb Nath & Md. Rezaul Karim & Faruk Hossain & Mohammed Main Uddin, 2023. "Impact of External Public Debt on Economic Growth: A Case Study of Bangladesh," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 14(3), pages 01-08, September.

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