The impact of government debt on economic growth - An empirical investigation of Southeast Asian area
Abstract
This research investigates the effects of government debt on economic growth in the sample of nine Southeast Asian countries by using the panel data over the period from 2007 to 2016. The study makes use of Fixed effects model and Random effects model to figure out the non-linear impact of debt-to-GDP ratio on economic growth rate with a turning point of 68%, which indicates that beyond this threshold public debt has a deleterious effect on long-term growth. In contrast, if the current government debt is lower than the tolerant limit, this kind of government debt is seen as productive with the purpose of boosting the economic growth instead of negatively influencing on GDP growth rate. The threshold is known as the alarming clock to call for more prudent indebtedness policy in these studied countries. Moreover, this research also shows the correlation between other economic indicators including saving/investment rate, population growth rate, real interest rate, expenditure, trade openness and economic growth.