Exploring the relationship between government DEBT and real GDP: a panel ARDL analysis

Author:

Hojdan David1ORCID

Affiliation:

1. Slovak Academy of Sciences, Institute of Economic Research, Sancova 56, 81105 Bratislava, Slovak Republic

Abstract

This study explores the impact of government debt on real GDP in 37 high-income economies from 1990 to 2019, using quarterly data and panel ARDL models with the PMG estimator to distinguish between short-run and long-run effects. Despite identifying a non-linear relationship between government debt and real GDP, suggesting a long-term debt threshold of 95% to 110%, robustness checks using the Common Correlated Effects estimator to adjust for cross-sectional dependence find no significant long-term impact of government debt on real GDP. This conclusion calls into question the existence of a universal debt threshold affecting economic growth in high-income economies and contributes to the debate on the optimal level of government debt and its economic effects.

Publisher

Vilnius Gediminas Technical University

Reference31 articles.

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