Buried in debt? An analysis of the heterogeneous effects of public debt overhang on growth
MetadataShow full item record
- Master of Science 
Both theoretical and empirical evidence suggests that excessive government indebtedness has adverse effects on economic stability. The Great Recession left many countries with the legacy of sluggish economic growth and historically high levels of public debt – two concerns that the COVID-19 pandemic has recently reinforced. To study the impact of public debt on the dynamics of economic growth, I use a panel of 95 low-, middle-, and high-income countries from 1960 to 2015 and an empirical implementation able to capture heterogeneities across countries. The analysis relies on investigating two candidate controls often associated with output performance – uncertainty and private debt. The purpose is to verify whether these variables drive the empirical regularity documented in the literature of public debt negatively associated with lower growth. I find support for a negative non-linear relationship between public debt and growth, a positive linear association between private debt and growth, and no evidence that uncertainty drives the negative association between government debt and growth.
Masteroppgave (MSc) in Master of Science in Applied Economics - Handelshøyskolen BI, 2021