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On the relation between public debt and economic growth: an empirical investigation

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  • Bettina Fincke
  • Alfred Greiner

Abstract

In this paper we empirically study the relation between public debt and economic growth. We analyze how the public debt to GDP ratio at a certain point in time is correlated with the GDP growth rate in the following period, where we consider a one-year time span, a three-years time interval and a five-years interval. Using panel data comprising seven developed countries from 1970-2012, we estimate a pooled regression model and a random effects model. We find strong evidence for a significantly negative relation between debt and growth. Further, for most specifications this relationship does not seem to be characterized by non-linearities.

Suggested Citation

  • Bettina Fincke & Alfred Greiner, 2015. "On the relation between public debt and economic growth: an empirical investigation," Economics and Business Letters, Oviedo University Press, vol. 4(4), pages 137-150.
    • Handle: RePEc:ove:journl:aid:10696
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/10696
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    Cited by:

    1. Alfred Greiner, 2020. "Public Debt in a Descriptive Endogenous Growth Model," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 173-187, May.
    2. Doojav, Gan-Ochir & Baatarkhuu, Munkhbayar, 2023. "Public debt and growth in Asian developing economies: evidence of non-linearity and geographical heterogeneity," MPRA Paper 120050, University Library of Munich, Germany.
    3. Panagiotis Pegkas, 2018. "The Effect of Government Debt and Other Determinants on Economic Growth: The Greek Experience," Economies, MDPI, vol. 6(1), pages 1-19, February.
    4. Pegkas Panagiotis, 2019. "Government Debt and Economic Growth. A Threshold Analysis for Greece," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 25(1), pages 1-6, February.
    5. D'Andrea, Sara, 2022. "A Meta-Analysis on the Debt-Growth Relationship," MPRA Paper 114409, University Library of Munich, Germany.
    6. Bulus Gokay Canberk, 2020. "Growth-maximizing public debt in Turkey: An empirical investigation," Economics and Business Review, Sciendo, vol. 6(3), pages 68-87, August.

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