Effects of Public Debt Burden on Economic Growth: An Investigation on Selected Countries

Gunduz F. O., ÇELİKAY F.

MALIYE DERGISI, no.177, pp.247-275, 2019 (ESCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2019
  • Journal Name: MALIYE DERGISI
  • Journal Indexes: Emerging Sources Citation Index (ESCI), TR DİZİN (ULAKBİM)
  • Page Numbers: pp.247-275
  • Keywords: Public Debt Burden, Economic Growth, Johansen Cointegration Test, Panel Error Correction Models
  • Eskisehir Osmangazi University Affiliated: Yes

Abstract

In this study, the short and the long term effects of public debt burden on economic growth are investigated. In this context, panel error correction models and a data set which is formed according to income groups adopted by the World Bank are used for 52 countries in the period of 2000-2017. As a result of the study, it has been found that the changes in the debt burden in low income countries will not affect the economic growth statistically in the short term. However, in the long term, one unit increase in the debt burden will cause the economic growth to decrease by 6 per thousand. On the contrary, in other groups, a change in debt burden affects economic growth negatively only in the short term. Therefore, the research findings support the arguments of Neoclassical Approach in low income countries while supporting Ricardian Equivalence Approach in other income groups.