Buried in debt? An analysis of the heterogeneous effects of public debt overhang on growth
Master thesis
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Date
2021Metadata
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- Master of Science [1722]
Abstract
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.
Description
Masteroppgave (MSc) in Master of Science in Applied Economics - Handelshøyskolen BI, 2021