Government Debt and GDP Growth

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.