Abstract
The question of how the government debt affects state’s economy is still under discussion. The goal of the present research is to explore correlations between government debt and such indicators as GDP, GDP growth rate, debt accumulation rate and budget deficit. Data on 176 world countries were analyzed. Significant negative correlation between debt and budget deficit and poor correlation between debt and GDP growth demonstrate that countries spend borrowed money to satisfy current societal needs, rather than for investments in economy. The only exception is the South and East Asia region, where higher debt is associated with higher GDP growth.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Afonso, A., & Jalles, J. T. (2013). Growth and productivity: The role of government debt. International Review of Economics and Finance, 25, 384–398.
Ancans, S. (2013). Latvia’s accession to the eurozone during its sovereign debt crisis. Economic Science for Rural Development, 30, 175–181.
Barro, R. J. (1987). The economic effect of budget deficits and government spending. Journal of Monetary Economics, 20, 191–193.
Bassetto, M., & Kocherlakota, N. (2004). On the irrelevance of government debt when taxes are distortionary. Journal of Monetary Economics, 51, 299–304.
Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56, 1392–1405.
Furceri, D., & Zdzienicka, A. (2012). How costly are debt crises? Journal of International Money and Finance, 31(4), 726–742.
Greiner, A. (2012). Public debt in a basic endogenous growth model. Economic Modelling, 29(4), 1344–1348.
IMF. (2013). Debt relief under the Heavily Indebted Poor Countries (HIPC) initiative [pdf]. Available at < http://www.imf.org/external/np/exr/facts/pdf/hipc.pdf> [Accessed September 10, 2013].
Ismihan, M., & Ozkan, F. G. (2012). Public debt and financial development: A theoretical exploration. Economics Letters, 115(3), 348–351.
Ludvigson, S. (1996). The macroeconomic effects of government debt in a stochastic growth model. Journal of Monetary Economics, 38(1), 25–45.
Mwaba, A. (2005). Beyond HIPC: What are the prospects for debt sustainability? (pp. 536–552). Oxford: Blackwell. African Development Bank 2005.
Raudla, R., & Kattel, R. (2013). Fiscal stress management during the financial and economic crisis: The case of the Baltic countries. International Journal of Public Administration, 36(10), 732–742.
Semjonova, N. (2014). Government debt and long-term economic growth in the world’s regions. Economic Sciences for Rural Development, 33, 56–65.
Wiley, F. F. (2014). The consequences of high government debt. Policy, 29(4), 31–45.
World Debt Clock. (2014). [online] Available at: <http://www.usdebtclock.org/world-debt-clock.html> [Accessed January 02, 2014].
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer International Publishing Switzerland
About this paper
Cite this paper
Semjonova, N. (2017). Government Debt and GDP Growth. In: Bilgin, M., Danis, H., Demir, E., Can, U. (eds) Financial Environment and Business Development. Eurasian Studies in Business and Economics, vol 4. Springer, Cham. https://doi.org/10.1007/978-3-319-39919-5_21
Download citation
DOI: https://doi.org/10.1007/978-3-319-39919-5_21
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-39918-8
Online ISBN: 978-3-319-39919-5
eBook Packages: Business and ManagementBusiness and Management (R0)