833655

research-article2019
RBPXXX10.1177/0034644619833655The Review of Black Political EconomySaungweme and Nicholas

Article
The Review of Black Political Economy
2018, Vol. 45(4) 339­–357
The Impact of Public © The Author(s) 2019
Article reuse guidelines:
Debt on Economic sagepub.com/journals-permissions
DOI: 10.1177/0034644619833655
https://doi.org/10.1177/0034644619833655

Growth: A Review of journals.sagepub.com/home/rbp

Contemporary Literature

Talknice Saungweme1 and Nicholas M. Odhiambo1

Abstract
This article provides a detailed survey of existing theoretical and empirical literature
on the impact of public debt on economic growth in both developing and developed
economies. The aim of the article is to add to the existing debate on the relationship
between public debt and economic growth in world economies. The survey finds
diverse and, in some cases, inconsistent evidence on the relative impact of public debt
on economic growth. Although the majority of the surveyed literature supports the
negative effect of public debt on economic growth, several other studies have found
a long-run positive impact of public debt on economic growth through the fiscal
multiplier effect. The article also found that a few other studies support the Ricardian
Equivalence Hypothesis (REH), which states that the relationship between public debt
and economic growth is nonexistent. On balance, the article also found that there is a
growing body of empirical evidence, which supports the presence of threshold effects
in the relationship between public debt and economic growth. Overall, it concludes that
theoretical models and empirical studies yield inconclusive results depending on a set of
heterogeneous factors, including the level of development of the sampled countries, data
coverage, methodology used, and the researchers’ choice of control variables, among
other factors. This literature survey differs predominantly from other earlier studies
in that it provides a comprehensive review of the linkage between government debt
and economic growth, in addition to disentangling public debt into two components,
domestic and foreign, and expounding on their relative effects on economic growth.

Keywords
public debt, economic growth, developing countries, developed countries, literature
survey

1University of South Africa, Pretoria, South Africa

Corresponding Author:
Talknice Saungweme, Department of Economics, University of South Africa, P.O. Box 392, Pretoria
0003, South Africa.
Email: talknice2009@gmail.com
340 The Review of Black Political Economy 45(4)

Introduction
The impact of government interventions on the economic growth process through pub-
lic debt, taxation, and expenditures, remains a major economic policy issue in world
economies. Although the causes and effects of foreign public debt in developing coun-
tries, particularly Africa, have been extensively debated in the past (see, among others,
Danso, 1990; Ndikumana and Boyce, 2015), the recent emergence of financial crises
in both emerging and developed economies, as well as the extensive variation in the
levels of economic growth rates across world economies, has generated renewed inter-
est among development economists on the impact of public debt on economic growth.
According to Ndikumana and Boyce (2003, 2015), Africa’s debt in the 1970s, 1980s,
and the early 1990s was not used productively and was linked to political elites, who
later channel it abroad. Thus, the debt plight has evolved over time, varying consis-
tently among world economies. Accordingly, this debate on the relationship between
public debt and economic growth dates back to the 18th century (see Davenant, 1701,
1712; Hume, 1752/1987; Hutcheson, 1714; Smith, 1776), but until now there is little
consensus on this subject matter. The inconsistency in theoretical and empirical con-
clusions on the debt-growth nexus has also added to the variations in policy approaches
across studied countries.
Public debt generally corresponds to the liabilities of the government and broadly
consists of debt securities and loans. According to the International Monetary Fund
(2013), public debt refers to the financial contractual obligations agreed by central gov-
ernment to repay to the creditors at a future date, comprising of both the principal amount
and accrued interests. Specifically, public debt is divided into domestic public debt and
foreign public debt, depending mainly on the residence of debt holders, the currency in
which the debt is denominated, and whether the debt was issued on the international debt
market or on the domestic debt market (see Elmendorf & Mankiw, 1999).
Following Buffie, Berg, Pattillo, Portillo, and Zanna (2012), there are four main
channels through which changes or stocks of public debt affect the rate of economic
growth. These are (a) private saving, (b) public spending and investment, (c) total fac-
tor productivity, and (d) sovereign long-term nominal and real interest rates (Buffie
et al., 2012). Against this backdrop, the purpose of this article is to review the existing
international literature on the link between domestic and foreign public debt and eco-
nomic growth, discussing both the theoretical frameworks and the empirical evidence.
This literature survey differs predominantly from other previous studies in that it pro-
vides a comprehensive review of the linkage between government debt and economic
growth, in addition to making some distinctions between domestic and foreign public
debt. Thus, to the best of our knowledge, this may be the first literature review study
of this kind. The rest of the article is divided into three sections. In “The Theoretical
Arguments on the Impact of Public Debt on Economic Growth” section, the theoreti-
cal arguments on the impact of public debt on economic growth are presented. In “The
Empirical Arguments on the Impact of Public debt on Economic Growth” section, the
empirical arguments on the impact of public debt on economic growth are presented.
The “Conclusion” section concludes the article.
Saungweme and Nicholas 341

The Theoretical Arguments on the Impact of Public Debt

on Economic Growth
Theoretical literature divides the relationship between public debt and economic
growth into four groups, namely, no impact, negative impact, positive impact, and
nonlinear impact.

Neutrality of Public Debt on Economic Growth—The Ricardian

Equivalence Hypothesis (REH)
Under the REH, changes in government spending, and hence public indebtedness,
result in identical changes in private savings, and therefore, no impact on the real
economy. According to Ricardo’s (1817/1951) line of argument, under certain settings
the real economy is independent of the government’s choice of raising revenue, that is,
either through taxation or debt issuance. Ricardo’s view on the impact of public debt
on resource allocation and economic growth dates back to 1820 and 1877 in his writ-
ings entitled the “Funding System” and “On the Principles of Political Economy and
Taxation,” respectively. Although Ricardo’s arguments on the debt-growth relation-
ship have received little attention over the years, his contribution to modern public
finance literature and policy cannot be overlooked. The views of Ricardo were first
popularized in the literature in the 20th century by Barro in 1974 and Buchanan in
1976, through their writings entitled “Are Government Bonds Net Wealth?,” and “Is
the public debt equivalent to taxation?,” respectively. Successive theoretical and
empirical works of Barro and Buchanan led to what is now known as the REH, which
in some literature is referred to as the Barro-Ricardo Equivalence Hypothesis.
Notwithstanding the substantial contributions made by Ricardo (1817/1951) and
Buchanan (1976) on this theory, Barro’s complementarity arguments seem to be more
popular, because of their pliability to empirical investigation.
In separate writings of Barro (1989) and Buchanan (1976), public debt is argued to
have no detrimental economic consequences as long as solvency is not an issue (Barro,
1989). In other words, the REH stipulates that government debt only explains move-
ment in financial resources among economic agents (Barro, 1989). Buchanan (1976),
for instance, argues that public sector debt has direct impact only on private consump-
tion and savings decisions, without leading to a net economic growth prospect. This
means that variations in domestic and foreign public debt stocks are invariant with
changes in major real macroeconomic variables, such as gross investment and output,
hence on the economy’s growth path (Barro, 1989). Similarly, in the neoclassical
framework, variations in public debt, through expansionary fiscal policies, are inde-
pendent of the general performance of the economy, thus supporting the argument of
fiscal policy ineffectiveness (see Barro, 1976; Pereira & Rodrigues, 2001). Therefore,
the Barro-Ricardo Equivalence Theory suggests that government indebtedness cannot
be used as an economic stimulation tool (see Barro, 1989).
The theoretical foundation of the REH is based on six assumptions. The first is that
capital markets are perfect—thus, the credit environment allows market participants to
342 The Review of Black Political Economy 45(4)

borrow unrestricted against future incomes. The second assumption is that population
growth, which in this case are the tax payers, is constant. Third, it is assumed that
economic agents are rational and have perfect foresight of the future. This means that
consumption decisions are made rationally, based on permanent income and life cycle
frameworks. The fourth assumption states that there is an infinite time horizon, with
intergenerational transfers. In other words, altruistic agents regard their heirs as exten-
sions of themselves, that is, the theorem assumes infinitely lived agents (overlapping
generation). The fifth assumption assumes that the future tax burden to service govern-
ment debt is fully borne by those who benefit from the initial tax cut. Finally, the sixth
assumption assumes that there are nondistortionary taxes (Barro, 1974, 1989;
Buchanan, 1987). Thus, in Barro’s (1974, 1989) assertions, if the above assumptions
hold, then shifts in the government’s funding strategy will be met by an equal adjust-
ment in private savings to neutralize movements in public savings (see also Elmendorf
& Mankiw, 1999).
The criticisms of the REH started with Feldstein (1976) and are mostly on the
ground of its theoretical foundations. First, Feldstein (1976) states that Barro’s asser-
tion overlooked the role of economic and population growth. According to Feldstein
(1976), when the economy is growing at a relatively higher rate than the interest rate
of government debt, then the government can scale up its debt without imposing future
taxes. He further established that the accumulation of public debt depresses savings in
a progressing economy (Feldstein, 1976). Second, Seater & Mariano (1985) and Seater
(1993) argue that altruism is absent at other arrangements of bequests, such as the
strategic and accidental bequests, rendering ambiguous the reliability of the REH.
Seater (1993) further states that what matters for the Ricardian proposition’s validity
is the path of debt and not the path of marginal tax rates, stressing that a change in debt
is not necessarily accompanied by changes in marginal tax rates. Finally, Bernheim
and Bagwell (1988) demonstrate that the REH is undermined by the extreme assump-
tion of the neutrality of prices in resource allocation. The authors add that the Barro’s
(1974) framework of strictly intertwined families is not realistic, as this linkage makes
neutral all redistributive policies and parallels distortionary taxes to lump-sum taxes
(Ricciuti, 2001). Finally, Cox and Jappelli (1990) assert that most world consumers are
liquidity constrained due to credit and capital market imperfections, a condition, which
alters individuals’ behavior over time.

Negative Impact of Public Debt on Economic Growth: A Theoretical

Literature Review
There is also a theoretical view that purports the impact of public debt on economic
growth to be negative. This view states that the REH does not hold, and that public debt
negatively affects real macroeconomic variables. Explicitly, the negative impact of
government debt on economic growth is explained fundamentally by the debt overhang
hypothesis. The debt overhang theory, as first postulated by Myers (1977), argues that
accumulation of public debt—due to fiscal deterioration—distorts the possibilities for
the private sector to make optimal future investment decisions (see also Reinhart et al.,
Saungweme and Nicholas 343

2012). This theory is supported by some traditional growth models, predominantly in a

neoclassical and endogenous setting, which argue that public borrowing reduces the
financial discipline of the budget process, and increases future tax burden (Buchanan,
1958; Diamond, 1965; Meade, 1958; Modigliani, 1961). In Diamond’s (1965) line of
argument, the level and changes in taxes because of domestic and foreign government
borrowing, negatively affect gross capital stock formation.
Under the debt overhang hypothesis, there are three channels through which public
debt negatively affects economic growth (see Cecchetti, Mohanty, & Zampolli, 2011;
Cochrane, 2011b; Patinkin, 1965; Panizza & Presbitero, 2013; Perotti, 2012; Soydan &
Bedir, 2015). The first is the rational expectation theory. This theory argues that the nega-
tive impact of government debt on growth emanates from either incorrect macroeco-
nomic forecasts or from uncertain reaction to macroeconomic stabilization policies by
economic agents (Churchman, 2001). The rational expectation theory also states that the
damaging impact of government debt could be much larger if high public debt increases
future policy uncertainty or leads to future prospects of confiscation, possibly through
inflation and financial repression (Cochrane, 2011a; Panizza & Presbitero, 2013).
The second channel through public debt negatively affects economic growth is
through the standard crowding-out effect theory. The crowding-out effect exists when
public expenditures displace a near equal amount of private spending. This occurs
when government borrowing (arising from fiscal deterioration) reduces the lending
capacity of the economy, leading to substantial rises in real interest rates, which has the
effect of thwarting sufficient private sector investment—resulting in economic decline
(see Huang, Panizza, & Varghese, 2018). Alternatively, government debt can be par-
ticularly deleterious to the economy if market players have restricted access to credit
(Broner, Aitor, Alberto, & Jaume, 2014). Thus, the crowding-out effect of public debt
on private investment can be either through prices (interest rate) or quantities (credit
rationing). The crowding-out theory further argues that public debt (financed by either
distortionary taxes or debt issuance) amplifies public policy uncertainty, which distorts
decision making by private economic entities, prompting disinvestment (Soydan &
Bedir, 2015). According to Soydan and Bedir (2015), most investments in an uncertain
economic environment will mostly be short-term, of low risk, and with a quick return—
with an overall effect of depressed long-run economic growth rates. Also, the crowd-
ing-out effect of public debt on economic growth is based on the investment/
saving-liquidity market framework. In this framework, Cecchetti et al. (2011) state that
public borrowing pushes up the cost of money and thus crowds out borrowers for mort-
gages, corporate investment, and consumption spending in the credit market.
The final argument on crowding-out effect is through fiscal illusion theorem.
According to Patinkin (1965) and Pereira and Rodrigues (2001), fiscal illusion arises
when myopic taxpayers fail to realize the full weight of future taxes implied by a sub-
stitution of government debt for tax finance. Consequentially, Pereira and Rodrigues
(2001) concluded that these economic agents will erroneously perceive such a swap as
an increase in their net worth, thus, increase their current consumption at the expense
of savings and investment—and hence leading to depressed long-run economic growth
rates.
344 The Review of Black Political Economy 45(4)

Positive Impact of Public Debt on Economic Growth: A Theoretical

Literature Review
There is also a group of theoretical literature that places the importance of public debt in
the economic growth process of a country—supported fundamentally by Adolf Wagner’s
hypothesis of “Law of increasing state activity” and the Keynesians’s fiscal multiplier
effect. On one hand, Wagner (1893) hypothesized that there is a positive relationship
between the level of economic development and the relative size of the public sector,
leading to increased public expenditure, mostly debt financed. Thus, in a restructuring
state, the activities and functions of the government increase to meet the economic,
social, political, and cultural needs of the people (Bird, 1971). According to Wagner
(1911), industrialization and urbanization tend to lead to great demand for complex and
expensive infrastructure development and social control. In other words, as societies
move toward modernization and urbanization, there is a progressively greater quantity
and multiplicity of public goods and services provided by government. Lybeck (1988)
adds that education, health, and other social services and goods exhibit income-elastic
demand functions, and that increasingly sophisticated military technology would absorb
larger proportions of national income. Under these theoretical frameworks, government
securities (public debt) function as liquid assets, and their increase has the effect of pro-
moting economic growth—liquidity supply effect (see Kobayashi, 2015).
On the other hand, the Keynesian view on the positive relationship between public
debt and economic growth is twofold: (a) rising public debt induces high levels of
productive public spending, which then act as automatic stabilizers in the economy
and (b) deficit-financed government spending has a more positive multiplier effect on
the economy than tax-financed government spending (Holtfrerich, 2013). The
Keynesian argument is that an increase in public sector spending (public debt) can
stimulate domestic economic activity and hence crowds-in private investment, if the
public debt is created by a sheer decrease in capital tax rates or by a substantial rise in
public sector capital investments, because both raise the net return to capital (Elmendorf
& Mankiw, 1999).
Apart from the Keynesian view, there is the conventional theory on public debt.
The conventional theory’s explanation of the positive relationship between public debt
and economic growth is based on the assertion that government borrowing from inter-
national financial and capital marks is necessary to fill the gap between domestic
investment and savings (Pattillo, Poirson, & Ricci, 2002). Elmendorf and Mankiw
(1999) added that by injecting new financial resources into the economy, foreign pub-
lic debts will, in the short run, stimulate aggregate demand and encourage increased
national output.
The positive impact of public debt on economic growth is also supported in litera-
ture by Delong and Summers (2012), who argued that in an economy in which output
is below full potential, unemployment is high, and supply constraints on short-run
demand are absent, a combination of high foreign public debt and hysteresis effects
will have a positive fiscal multiplier effect on the economy. In other words, Greiner
(2006) argued, fiscal expansion is self-financing and stimulates aggregate demand in
Saungweme and Nicholas 345

the long run in a depressed economy when interest rates are rising, leading to eco-
nomic growth.
In addition to the positive effects of foreign public debt on the economy, there is the
positive impact of domestic public borrowing on the economy. Specifically, Gulde,
Pattillo, and Christensen (2006) argued that government borrowing from domestic debt
markets help strengthen domestic money and financial markets, in addition to boosting
private savings, and hence stimulate gross investment (see also Abbas & Christensen,
2007). According to Abbas and Christensen (2007), in economies where there are well-
developed domestic debt markets, monetary authorities’ control over credit ceilings,
interest rates, and high reserve requirements will be limited. The authors added that
financial controls distort the banking sector’s lending decisions, leading to financial
disintermediation at the expense of private sector savings and investments.
Finally, the positive impact of domestic public debt on economic growth is
explained by Moss, Pettersson, and de Walle (2006) and Christensen (2004). According
to Moss et al. (2006), the availability and accessibility to domestic financing by the
government may also help eliminate the impact of external shocks on the economy,
which weakens domestic financial institutions. More so, Christensen (2004) added
that the availability and accessibility to domestic public debt instruments can provide
savers with an attractive alternative to capital flight, in addition to luring savings from
the nonmonetary sector into the formal financial system. The author added that pros-
pects of economic growth will, therefore, be improved through increased gross
national savings, improved perceptions of currency and country risk, reduced size of
the black economy, increased financial depth, and widened formal tax base.

Nonlinear Impact of Public Debt on Economic Growth: A Theoretical

Literature Review
Outside the theories discussed above, there is another theory that validates the exis-
tence of nonlinear relationship between public debt and economic growth. According
to the nonlinear or threshold effect theory, the contribution of public debt to economic
growth is theorized to be positive at lower levels and negative at higher levels of pub-
lic debt (see Mupunga & Le Roux, 2015; Reinhart & Rogoff, 2010b). This growth-
optimizing public debt threshold theory is explained in literature by Sachs (1989) and
Krugman (1988), and is based principally on the concept of debt overhang hypothesis.
According to Krugman (1988), when public debt is below a certain threshold, the
crowding-in effect of government dominates the crowding-out effect, such that
increases in public debt promote economic growth. Krugman (1988) explains that
economic growth only occurs when rising productive public spending replaces the
reduction in private spending. However, Krugman (1988) argues that beyond a certain
threshold, public debt will have an adverse effect on economic growth, as the crowd-
ing-out effect outweighs the crowding-in effect. The author states that the crowding-
out effect occurs because government borrowings to finance fiscal deficit reduces the
quantum of available loanable funds to the private sector, resulting in gross national
investment decline.
346 The Review of Black Political Economy 45(4)

Optimal public

GDP
Real

Positive Negative Public

Figure 1.  Bell-shaped debt-growth relationship.

Source. Adapted from Claessens (1990).
Note. GDP = gross domestic product.

Similarly, Sachs (1989) argues that lower levels of public debt stimulates economic
growth, but beyond a certain limit, high levels of government debt increase economic
uncertainties through expected future tax increases. The author argues that the resul-
tant economic uncertainties cause retarded investment and consumption, less employ-
ment, and lower output growth rates—the crowding-out effect (see also Pattillo et al.,
2002). This nonlinear relationship between public debt and economic growth is repre-
sented by the following diagram (Figure 1), which was initially formulated and derived
by Krugman (1988):

The Empirical Arguments on the Impact of Public Debt

on Economic Growth
The empirical literature on the impact of public debt on economic growth is vast, with
divergent conclusions. Although some studies have found public debt to reduce eco-
nomic growth rates, other studies have found public debt to positively drive the growth
process of an economy, and yet a few studies have found public debt to have an insig-
nificant impact on economic growth. Finally, there is a growing body of empirical
evidence supporting nonlinear impact of public debt on economic growth. This section
provides a comprehensive empirical literature survey on the relationship between pub-
lic debt, domestic and foreign, and economic growth in both developing and devel-
oped countries.

Empirical Literature Supporting Nonlinear Impact of Public Debt on

Economic Growth
The studies, where results were in one way or the other consistent with the nonlinear
impact of public debt on economic growth are those of Herndon, Ash, and Pollin (2014);
Baum et al. (2012); Minea and Parent (2012); Cecchetti et al. (2011); Caner, Grennes,
Saungweme and Nicholas 347

and Koehler-Geib (2010); Checherita-Westphal and Rother (2010); Kumar and Woo
(2010); and Reinhart and Rogoff (2010b), among others.
To begin with, Herndon et al. (2014) simulated part of Reinhart and Rogoff’s
(2010a, 2010b) analyses using 20 advanced economies for the period from 1946 to
2009. Contrary to Reinhart and Rogoff’s (2010a, 2010b) perceived public debt/GDP
tip-off point at 90%, Herndon et al. (2014) established that there is remarkable evi-
dence that such nonlinearity at this level does not exist—adding that this nonlinearity
ensues when public debt/GDP ratio lies between 0% and 30%. More specifically,
Herndon, Ash, and Pollin (2013) found that the relationship between high public debt
and economic growth is more linear for countries carrying a public debt-to-GDP ratio
of over 90%, which is contrary to Reinhart and Rogoff’s (2010a, 2010b) conclusions.
The authors, Herndon et al. (2014), further add that the nonlinear relationship varies
significantly by country and over time, further stating that Reinhart and Rogoff’s
(2010a, 2010b) analyses suffered from unconventional weighting of summary statis-
tics, excessive data exclusions—for some countries such as Australia, and coding
errors (see also Dafermos, 2015).
Baum et al. (2012) investigated the impact of public debt on annual real GDP
growth rates in 12 European countries using the dynamic threshold panel methodology
for the period from 1990 to 2010. The empirical findings of Baum et al. (2012) suggest
that the short-run impact of public debt on real GDP growth is positive and highly
statistically significant. However, Baum et al. (2012) found that as the public debt-to-
GDP ratio approaches 67%, the relationship decreases to around zero and subsequently
varnishes. For public debt-to-GDP ratios above 95%, public debt was found to have an
adverse impact on annual real GDP growth rates.
Minea and Parent (2012), using the panel smooth threshold regressions model,
studied the relationship between public debt and real GDP growth rate and found
strong support for the threshold theory. Specifically, the authors found that public debt
is negatively related to real GDP growth rate when the government debt-to-GDP ratio
is between 90% and 115%. The authors, however, found that the relationship between
public debt and real GDP growth rate becomes positive when debt exceeds 115% of
GDP, and that there is no statistically significant relationship between the two vari-
ables when the public debt to GDP ratio is below 90%.
Cecchetti et al. (2011) also found evidence supporting a nonlinear relationship
between public debt and GDP per capita using a sample of 18 Organization for Economic
Cooperation and Development (OECD) countries for the period from 1980 to 2008. The
study findings of Cecchetti et al. (2011) show a threshold value of 85% of GDP, below
which public debt positively affects GDP per capita and beyond which it retards eco-
nomic growth. Cecchetti et al. (2011) concluded that an increase of 10% in the public
debt-to-GDP ratio after the 85% leads to a 0.13% decline in per capita GDP growth rate.
Checherita-Westphal and Rother (2010), while examining the relationship between
public debt and per capita GDP growth rate across 12 European countries for the period
from 1970 to 2010, found evidence consistent with a nonlinear bell-shaped relationship
between the variables. The authors used a quadratic specification, estimated by fixed
effects, system generalized method of moments (GMM), and two stages least squares.
348 The Review of Black Political Economy 45(4)

More specifically, the results of Checherita-Westphal and Rother (2010) show that
there is a positive relationship between public debt and per capita GDP growth rate for
public debt-to-GDP ratio of below 90%, with marginal effect of public debt turning
negative when the public debt-to-GDP ratio is between 90% and 105%.
Reinhart and Rogoff (2010b), while using a sample of 44 countries, 20 advanced
economies and 24 emerging economies spanning the period from 1946 to 2009 for
advanced countries and from 1946 to 2009 and 1900 to 2009 for emerging countries,
also found some evidence of nonlinearity, with higher levels of public debt having a
proportionately larger negative impact on GDP growth and inflation rate. The study
findings of Reinhart and Rogoff (2010b) reveal that high public debt relative to GDP,
of above 90%, is associated with lower GDP growth rates in both advanced and emerg-
ing countries, while at lower levels debt has little effect on economic growth. The
results also indicate that lower levels of foreign public debt relative to GDP, of less
than 60%, are associated with adverse GDP growth rates in emerging economies.
Other recent studies conducted to test the relevance of nonlinear theory of public
debt on economic growth include those of Kumar and Woo (2010) for the case of 30
advanced economies over the period from 1970 to 2007, Presbitero (2010) for the case
of low-income countries over the period from 1990 to 2007, and Cordella et al. (2010)
for the case of developing countries over the period from 1970 to 2007.

Empirical Literature Supporting Negative Impact of Public Debt on

Economic Growth
Apart from studies that have found nonlinear impact of public debt on economic growth,
there is a large body of empirical work that supports a negative impact between these
two variables. These studies include Gómez-Puig and Sosvilla-Rivero (2015; 2017),
Ahlborn and Schweickert (2016), Panizza and Presbitero (2013), Szabo (2013), Égert
(2012), Afonso and Jalles (2011), Cochrane (2011a, 2011b), Kumar and Woo (2010), the
International Monetary Fund (2005), and Clements, Bhattacharya, and Nguyen (2003).
Gómez-Puig and Sosvilla-Rivero (2017) examined the long-run links between pub-
lic debt and GDP growth rates in both central and peripheral countries of the Euro area
for the period from 1961 to 2013. Employing the autoregressive distributed lag (ARDL)
bounds testing approach on annual data, the authors’ findings reveal a negative impact
of public debt on the long-run GDP growth rates of Euro area member states.
Ahlborn and Schweickert (2016), while testing the relationship between public
debt and GDP growth using a sample of 111 OECD and developing countries for eight
5-year periods from 1970 to 2010, concluded that the link between public debt and
GDP growth varies considerably across countries due to the degree of fiscal uncer-
tainty brought about by each economic system. After employing varying methodolo-
gies, which include time-fixed effects, random effects pooled ordinary least squares
(OLS), and two-stage least squares, the empirical findings of Ahlborn and Schweickert
(2016) suggest that public debt has a strong negative impact on GDP growth in conti-
nental countries than in liberal countries.
Panizza and Presbitero (2013), using an instrumental variable approach, studied
whether public debt, proxied by public debt/GDP ratio, adversely affect real GDP
Saungweme and Nicholas 349

growth per capita in a sample of OECD countries. The study findings of Panizza and
Presbitero (2013) show a negative correlation between public debt/GDP ratio and real
GDP growth per capita in all studied economies.
Szabo (2013) also investigated the impact of public debt-to-GDP ratio and GDP
growth rate in 27 E.U. countries using linear regression models for the period from
2008 to 2014. The results of Szabo reveal that in the short run, public debt has detri-
mental effects on GDP growth rate and that growth is more sensitive to changes in
public debt levels, while in the long run, the impact of public debt on GDP growth rate
is weak. More precisely, the results of Szabo (2013) show that a 1% increase in debt/
GDP ratio results in 0.027% decrease in annual GDP growth rate.
Égert (2012) also found evidence supporting the existence of a negative relation-
ship between public debt and GDP growth rate in 20 advanced economies over the
period from 1946 to 2009. The author used the traditional linear model with thresholds
at 30%, 60%, and 90%. Finally, Afonso and Jalles (2011) assessed the effect of gov-
ernment debt on GDP per capita growth and productivity in 155 developing and devel-
oped countries from 1970 to 2008. Using both pooled OLS and cross-section time
series regressions, the authors found a statistically significant negative relationship
between government debt and GDP per capita growth in all studied economies.
Other recent studies conducted to test the negative impact of public debt on eco-
nomic growth include those of Abbas et al. (2011) for the case of 174 countries, Afonso
and Jalles (2011) for the case of 155 countries, Kumar and Woo (2010) for the case of
30 advanced economies, Reinhart and Rogoff (2010a, 2010b) for the case of 44 coun-
tries, Schclarek (2004) for the case of 59 developing countries, and Clements et al.
(2003) for the case of 55 developing countries.

Empirical Survey on Works Supporting Positive Impact of Public Debt

on Economic Growth
In addition to empirical studies supporting a nonlinear and negative relationship
between public debt and economic growth, there are those that found a positive link
between the two macroeconomic variables. These studies include Owusu-Nantwi and
Erickson (2016), Uzun, Kabadayi, and Emsen (2012), Greiner (2011b), and Abbas and
Christensen (2007).
Owusu-Nantwi and Erickson (2016) tested the link between government debt and
real GDP growth rate in Ghana using both the Johansen cointegration and the vector
error correction models for the period from 1970 to 2012. The authors found a statisti-
cally significant positive long-run association between government debt and real GDP
growth rate in Ghana. The study findings show that for every 1% increase in govern-
ment debt, there will be a 2.8% increase in real GDP growth rate.
Uzun et al. (2012) investigated the impact of foreign public debt on GDP per capita
growth rate in 19 transitional economies using panel ARDL model. The period of
study was from 1991 to 2009. The study results found a long-run positive correlation
between foreign public debt and GDP per capita growth rate in studied countries.
Greiner (2011) also examined the effect of public debt-to-GDP ratio, GDP growth
and welfare in a sample of developed countries using endogenous growth models.
350 The Review of Black Political Economy 45(4)

Greiner (2011) found that in economies where the governments run a balanced budget
or issue debt such that the debt-to-GDP ratio asymptotically converges to zero, there
will be higher GDP growth rates than in economies where the government runs defi-
cits such that the debt-to-GDP ratio will be strictly positive. These findings by Greiner
(2011) support the results of Bohn (1998), who studied the relationship between public
debt and real GDP growth using U.S. data.
Finally, Abbas and Christensen (2007), using a sample composed of 93 low-income
countries and emerging economies for the period from 1975 to 2004 found that moder-
ate levels of noninflationary domestic public debt as a proportion of GDP exert a sig-
nificant linear positive impact on per capita GDP growth through an increase in
investment efficiency. Abbas and Christensen (2007) analyzed the debt-growth nexus
using the modified system of generalized method of moments estimation technique.
The authors concluded that the growth contribution of domestic public debt is higher
if (a) it is marketable, (b) it bears positive real interest rates, and (c) it is held outside
the banking system.

Empirical Literature on Public Debt-Growth Neutrality

Finally are those empirical studies that have found evidence consistent with the neu-
trality of public debt on economic growth. These studies are limited, and include those
by Kourtellos, Stengos, and Tan (2013), Panizza and Presbitero (2012), and Schclarek
(2004).
Kourtellos et al. (2013) examined the impact of public debt, proxied by government
debt-to-GDP ratio, on the growth rate of real per capita GDP using a balanced 10-year
period panel data set covering 82 advanced economies. The period of study was from
1980 to 2009. Employing a combination of structural threshold methodology and
pooled panel linear regressions, the authors found that if a country’s institutions are of
sufficiently high quality, then, public debt is growth neutral.
Panizza and Presbitero (2012) also investigated the relationship between public
debt and the rate of GDP growth in a sample of OECD countries using the instrument
variable method. The results of Panizza and Presbitero (2012) failed to reject the null
hypothesis that debt has no impact on the rate of GDP growth in studied economies.
Panizza and Presbitero (2012), therefore, concluded that the neutrality of public debt
on the rate of GDP growth in these studied developed economies could be due to the
fact that all OECD countries were using their own central banks as lenders of last
resort, and that the economies were still below the country-specific thresholds at which
public debt starts imposing a negative effect on the rate of GDP growth.
Finally, Schclarek (2004) analyzed the effect of public debt on per capita GDP
growth in a panel of 24 industrial countries and 59 developing countries between 1970
and 2002, with data averaged into 5-year periods. From these studies, Schclarek (2004)
concluded that the link between foreign public debt and per capita GDP growth is
nonexistent in developing countries; and that public debt and per capita GDP growth
are independent in industrialized economies.
Table 1 presents a summary of studies on the impact of public debt on economic
growth.
 Table 1.  Empirical Research on the Impact of Public Debt on Economic Growth.
Author(s) Title Region/country Research methodology Findings

Studies consistent with nonlinear impact of public debt on economic growth

Baum et al. (2012) Debt and growth of new evacidence for European countries ¾¾ Dynamic threshold panel Nonlinear impact
the Euro area methodology
Minea and Parent (2012) Is high public debt always harmful to IMF database ¾¾ Panel smooth threshold Nonlinear impact
economic growth? Reinhart and Rogoff regression
and some complex nonlinearities
Cecchetti, Mohanty, and The real effects of debt 18 OECD countries ¾¾ Panel data growth model with Nonlinear impact
Zampolli (2011) specific fixed effects
Checherita-Westphal and The impact of high and growing 12 developed countries ¾¾ Panel fixed effects Nonlinear impact
Rother (2010) government debt on economic growth an
empirical investigation for the Euro area
Reinhart and Rogoff Growth in a time of debt 44 countries—20 ¾¾ Panel data growth model with Nonlinear impact
(2010b) advanced economies and fixed effects
24 emerging economies
Studies consistent with negative impact of public debt on economic growth
Gómez-Puig and Sosvilla- Public debt and economic growth: Further 11 European countries ¾¾ ARDL bounds testing approach Negative impact
Rivero (2017) evidence for the Euro area ¾¾ Annual time series data
Ahlborn and Schweickert Public debt and economic growth— 111 OECD and developing ¾¾ Panel data Negative
(2016) Economic systems matter countries ¾¾ Time fixed effects impact—in
¾¾ Random effects pooled OLS continental
estimator countries
¾¾ Two-stage least squares
Panizza and Presbitero Public debt and economic growth: Is there OECD countries ¾¾ Instrumental variable approach Negative impact
(2013, 2014) a causal effect?
Szabo (2013) The effect of sovereign debt on economic European Union countries ¾¾ Linear regression model Negative impact
growth and economic development
Egert (2012) Public debt, economic growth, and OECD countries ¾¾ Traditional linear regression Negative impact
nonlinear effects: Myth or reality? model No threshold
effects

(continued)

351
352
Table 1.  (continued)

Author(s) Title Region/country Research methodology Findings

Studies consistent with positive impact of public debt on economic growth

Owusu-Nantwi and Public debt and economic growth in Ghana Ghana ¾¾ Johansen cointegration analysis Positive impact
Erickson (2016) ¾¾ Vector error correction model
Uzun, Kabadayi, and The impacts of external debt on economic 19 transitional economies ¾¾ ARDL bounds testing approach Positive impact
Emsen (2012) growth in transition economies ¾¾ Panel data
Greiner (2011) Economic growth, public debt, and welfare: European countries ¾¾ Endogenous growth model Positive impact
Comparing three budgetary rules
Abbas and Christensen The role of domestic markets in economic 93 low-income countries ¾¾ Fixed effects and OLS Positive impact
(2007) growth: An empirical investigation for and emerging economies ¾¾ Random effects and System of
low-income countries and emerging GMM estimation technique
markets
Studies consistent with no impact of public debt on economic growth
Kourtellos, Stengos, and The effect of public debt on growth in 82 advanced economies ¾¾ Structural threshold No impact
Tan (2013) multiple regimes methodology
¾¾ Pooled panel linear regressions
Panizza and Presbitero Public debt and economic growth: OECD countries ¾¾ Instrument variable approach No impact
(2012) Is there a causal effect?
Schclarek (2004) Debt and economic growth in developing 24 developed countries ¾¾ GMM estimator No impact—in
industrial countries developed
countries

Note. OECD = Organization for Economic Cooperation and Development; ARDL = autoregressive distributed lag; OLS = ordinary least squares; GMM = generalized method of
moments; IMF = international monetary fund.
Saungweme and Nicholas 353

Conclusion
In this article, the theoretical and empirical literature on the impact of public debt on
economic growth is reviewed. Although the reviewed literature on the impact of pub-
lic debt on economic growth dates back to the 18th century, there is little consensus on
the impact of public debt on economic growth. The reviewed international literature
on the impact of public debt on economic growth can be divided into four groups: (a)
studies consistent with the neutrality of public on economic growth—the REH, (b)
studies consistent with a negative relationship between public debt and economic
growth, (c) studies consistent with a positive relationship between public debt and
economic growth, and (d) studies consistent with threshold effects between public
debt and economic growth. On balance, most of the surveyed international literature
supports the crowding-out effect of public debt on economic growth. Overall, this
review shows that the impact of public debt on economic growth is not given and var-
ies depending on a set of heterogeneous factors, including the level of development of
the sampled countries, institutional quality, the relative size of the public sector, the
composition and structure of the government debt, data sets and research methodology
used, and the selected control variables, among other factors. The study, therefore,
concludes that the impact of public debt on economic growth is not clear-cut, and that
the notion that public debt is bad for economic growth is merely based on prima facie
or superficial evidence—and should be taken with a pinch of salt.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of
this article.

References
Abbas, A. S. M., & Christensen, J. E. (2007). The role of domestic debt markets in economic
growth: An empirical investigation for low-income countries and emerging markets (IMF
working papers No. 07/127). Washington, DC: International Monetary Fund.
Abbas, S.M.A., Belhocine, N, El-ganainy, A.A & Horton, M.A. (2011). Historical patterns
and dynamics of public debt: Evidence from a new database. IMF Economic Review, Vol.
59(4), 717-742.
Afonso, A., & Jalles, J. T. (2011). Economic performance and government size (ECB Working
Paper No. 1399). Frankfurt, Germany: European Central Bank.
Ahlborn, M., & Schweickert, R. (2016, March). Public debt and economic growth—Economic
systems matter (CEGE Discussion Paper No. 281) Göttingen, Germany.
Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82,
1095-1117.
Barro, R.J. (1976). Reply to Feldstein and Buchanan, Journal of Political Economy, 84, 343-349.
354 The Review of Black Political Economy 45(4)

Barro, R. J. (1989). The Ricardian approach to budget deficits. The Journal of Economic
Perspectives, 3, 37-54.
Baum, A., Checherita-Westphal, C., & Rother, P. (2012). Debt and growth: New evidence for
the Euro Area. ECB Working Paper. No. 1450. July 2012.
Bernheim, B. D., & Bagwell, K. (1988). Is everything neutral? Journal of Political Economy,
96, 308-338.
Bird, R. M. (1971). Wagner’s law of expanding state activity. Public Finance, 26, 1-26.
Bohn, H. (1998) “The behaviour of U.S. public debt and deficits”, Quarterly Journal of
Economics, 113, 949-963.
Broner, F., Aitor, E., Alberto, M., & Jaume, V. (2014). Sovereign debt markets in turbulent
times: Creditor discrimination and crowding-out effects. Journal of Monetary Economics,
61, 114-142.
Buchanan, J. M. (1958). Public principles of the public debt. Homewood, IL: Richard D. Irwin.
Buchanan, J. M. (1976). Barro on the Ricardian equivalence theorem. Journal of Political
Economy, 84, 337-342.
Buchanan, J.M., & Roback, J. (1987) “The Incidence and Effects of Public Debt in the Absence
of Fiscal Illusion”, Public Finance Quarterly, Vol. 15, No. 1: pp. 5 -25.
Buffie, E. F., Berg, A., Pattillo, C., Portillo, R., & Zanna, L. F. (2012). Public investment,
growth, and debt sustainability: Putting together the pieces (IMF Working Paper No.
12/144). Washington, DC: International Monetary Fund.
Caner, M., Grennes, T., & Koehler-Geib, F. (2010). Finding the tipping point: When sovereign
debt turns bad. In C. Braga & G. Vincelette (Eds.), Sovereign debt and the financial crisis:
Will this time be different? Washington, DC: The World Bank. pp: 1-460.
Cecchetti, S., Mohanty, M. S., & Zampolli, F. (2011). Achieving growth amid fiscal imbal-
ances: The real effects of debt in achieving maximum long-run growth - A symposium
sponsored by The Federal Reserve Bank of Kansas City, September 2012. Federal Reserve
Bank of Kansas City.
Checherita-Westphal, C., & Rother, P. (2010). The impact of high and growing government
debt on economic growth. An empirical investigation for the Euro Area”. ECB Working
Paper. No. 1237. August 2010.
Christensen, J. E. (2004). Domestic debt markets in Sub-Saharan Africa (IMF Working Paper
No. 04/46). Washington, DC: International Monetary Fund.
Churchman, N. (2001). David Ricardo on public debt. New York, NY: Palgrave.
Claessens, S. (1990). The debt Laffer curve: Some estimates, World Development,18(12), 1671-
1677
Clements, B., Bhattacharya, R., & Nguyen, T. Q. (2003). External debt, public investment
and growth in low-income countries (IMF Working Paper No. 03/249). Washington, DC:
International Monetary Fund.
Cochrane, J. H. (2011a). Inflation and debt. National Affairs, 9, 56-78.
Cochrane, J. H. (2011b). Understanding policy in the great recession: Some unpleasant fiscal
arithmetic. European Economic Review, 55, 2-30.
Cordella, T., Ricci, L.A., & Ruiz-Arranz, M. (2010). Debt Overhang or Debt Irrelevance?, IMF
Staff Papers, 57(1), 1-24.
Cox, D., & Jappelli, T. (1990). Credit rationing and private transfers: Evidence from survey
data. Review of Economics and Statistics, 72, 445-454.
Dafermos, Y. (2015). The “other half” of the public debt-economic growth relationship: A note
on Reinhart and Rogoff. European Journal of Economics and Economic Policies, 12, 20-28.
Saungweme and Nicholas 355

Danso, A. (1990). The causes and impact of the African debt crisis. The Review of Black
Political Economy, 19, 5-21.
Davenant, C. (1701). An essay upon ways and means of supplying the war (3rd ed.). London,
England: J. Tonson.
Davenant, C. (1712). An act for the taking, examining, and starting the public accounts of the
kingdom (Part I). London, England.
Delong, B. J., & Summers, L. H. (2012). Fiscal policy in a depressed economy. Brookings
Papers on Economic Activity. Retrieved from https://www.brookings.edu/bpea-articles/
fiscal-policy-in-a-depressed-economy/
Diamond, P. (1965). National debt in a neoclassical growth model. American Economic Review,
55, 1126-1150.
Égert, B. (2012, October 17). Public debt, economic growth and nonlinear effects: Myth
or reality? (OECD Economic Department Working Paper. No. 993). Retrieved from
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/
WKP(2012)70&docLanguage=En
Elmendorf, D. W., & Mankiw, G. N. (1999). Government debt. In J. B. Taylor & M.
Woodford (Eds.), Handbook of macroeconomics (Vol. 1, Chapter 25, pp. 1615-1669).
Elsevier, Amsterdam: North Holland.
Feldstein, M. (1976). Perceived wealth in bonds and social security: A comment. Journal of
Political Economy, 84, 331-336.
Gómez-Puig, M., & Sosvilla-Rivero, S. (2015). On the bi-directional causal relationship
between public debt and economic growth in EMU countries (University of Barcelona
Research Institute of Applied Economics Working Paper No. 15-06). Retrieved from
https://ideas.repec.org/p/aee/wpaper/1506.html
Gómez-Puig, M., & Sosvilla-Rivero, S. (2017). Public debt and economic growth: Further
evidence for the Euro area (Research Institute of Applied Economics Working Paper
2017/15). Institut de Recerca en Economia Aplicada Regional i Pública. Retrieved from
http://www.ub.edu/irea/working_papers/2017/201715.pdf
Greiner, A. (2006). Human capital formation, public debt and economic growth. Journal of
Macroeconomics, 30, 415-427.
Greiner, A. (2011). Economic growth, public debt and welfare: Comparing three budgetary
rules. German Economic Review, 12, 205-222.
Gulde, A., Pattillo, C., & Christensen, J. (2006). Sub-Saharan Africa: Financial sector chal-
lenges. Washington, DC: International Monetary Fund.
Herndon, T., Ash, M., & Pollin, R. (2013). Does high public debt consistently stifle economic
growth? A critique of Reinhart and Rogoff (PERI Working Paper No. 322). Amherst:
Political Economy Research Institute, University of Massachusetts.
Herndon, T., Ash, M., & Pollin, R. (2014). Does high public debt consistently stifle economic
growth? A critique of Reinhart and Rogoff. Cambridge Journal of Economics, 38, 257-279.
Holtfrerich, C. L. (2013, April). Government debt in economic thought of the long 19th century
(Discussion paper). Contributed to the symposium on “Government Debt in Democracies,”
Berlin, Germany.
Huang, Y., Panizza, U., & Varghese, R. (2018). Does public debt crowd out corporate invest-
ment? International evidence (IHEID Working Papers No. HEIDWP08-2018, economics
section). The Graduate Institute of International Studies. Retrieved from https://repository
.graduateinstitute.ch/record/296011/files/HEIDWP08-2018.pdf
Hume, D. (1752) Of Public Credit. In Miller, E.F. (ed). Essays Moral, Political and Literary.
Liberty Fund 1987, pp. 205-213.
356 The Review of Black Political Economy 45(4)

Hutcheson, A. (Ed.). (1714). A collection of treatises relating to the national debts and funds.
London, The South Sea Company.
International Monetary Fund. (2005). Monetary and fiscal policy design issues in low-income
countries. Washington, DC: Author.
International Monetary Fund. (2013). Public sector debt statistics: A guide for compilers and
users. Washington, DC: Author.
Kobayashi, K. (2015). Public debt overhang and economic growth. Public Policy Review, 11,
247-276.
Kourtellos, A., Stengos, T., & Tan, C. M. (2013). The effect of public debt on growth in mul-
tiple regimes. Journal of Macroeconomics, 38, 35-43.
Krugman, P. (1988). Financing vs. forgiving a debt overhang. Journal of Development
Economics, 29, 253-268.
Kumar, S. M., & Woo, J. (2010, July). Public debt and growth (IMF Working Paper 2010/174).
Retrieved from https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Public-Debt
-and-Growth-24080
Lybeck, J. A. (1988). Comparing government growth rates: The non-institutional vs. the institu-
tional approach. In J. A. Lybeck, & M. Henkerson (Eds.), Explaining the growth of govern-
ment (pp. 29-48). Amsterdam, The Netherlands: North-Holland.
Meade, J. E. (1958). Is the national debt a burden? Oxford Economic Papers, 10, 163-183.
Minea, A., & Parent, A. (2012). Is high public debt always harmful to economic growth?
Reinhart and Rogoff and some complex nonlinearities (CERDI, Etudes et Documents, E
2012.18). Retrieved from https://halshs.archives-ouvertes.fr/halshs-00700471/document
Modigliani, F. (1961). Long-run implications of alternative fiscal policies and the burden of the
national debt. Economic Journal, 71, 730-755.
Moss, T., Pettersson, N., & de Walle, N. V. (2006). An aid-institutions paradox? (Centre
for Global Development Working Paper 74). Washington, DC: Centre for Global
Development.
Mupunga, N., & Le Roux, P. (2015). Estimating the optimal growth-maximising public debt
threshold for Zimbabwe. Southern African Business Review, 19, 102-128.
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics,
5, 147-175.
Ndikumana, L. & Boyce, J. K. (2003). “Public Debts and Private Assets: Explaining Capital
Flight from Sub-Saharan African Countries”, World Development, 31(1), 107-130.
Ndikumana, L & Boyce, J.K. (2015). Africa’s Odious Debts: How Foreign Loans and Capital
Flight Bled a Continent, Journal of Economic and Social Thought, 3(2), 217-223.
Owusu-Nantwi, V., & Erickson, C. (2016). Public debt and economic growth in Ghana. African
Development Review, 28, 116-126.
Panizza, U., & Presbitero, A.F. (2012). Public debt and economic growth: Is there a causal
effect? POLIS Working Paper. No. 198. April 2012.
Panizza, U., & Presbitero, A. F. (2013, January). Public debt and economic growth in advanced
economies: A survey (MoFiR Working Paper No. 78). Retrieved from https://ideas.repec
.org/p/anc/wmofir/78.html
Panizza, U., & Presbitero, A. F. (2014). Public debt and economic growth: Is there a causal
effect? Journal of Macroeconomics, 41, 21-41.
Patinkin, D. (1965). Money, interest and prices (2nd ed.). New York, NY: Harper & Row.
Pattillo, C., Poirson, H., & Ricci, L. (2002). External debt and growth (IMF Working Paper No.
02/69). Washington, DC: International Monetary Fund.
Saungweme and Nicholas 357

Pereira, A. M., & Rodrigues, P. G. (2001). Public debt and economic performance (Ministério
das Finanças, DGEP Working Paper 20). Retrieved from http://www.gpeari.gov.pt/inves-
tigacao/working-papers/w-papers-dgep/w-paper20.pdf
Perotti, R. (2012). The austerity myth: Gain without pain? In Fiscal policy after the financial
crisis (NBER chapters). National Bureau of Economic Research. Retrieved from https://
www.nber.org/papers/w17571
Presbitero, A. F. (2010). The debt-growth nexus in Jamaica. Rome, Italy: Università Politecnica
delle Marche.
Reinhart, C. M., & Rogoff, K. S. (2010a, November). Debt and growth revisited. VoxEU.org.
Reinhart, C. M., & Rogoff, K. S. (2010b). Growth in a time of debt. American Economic
Review, 100, 573-578. Retrieved from https://voxeu.org/article/debt-and-growth-revisited
Reinhart, C.M., Reinhart, V.R. & Rogoff, K.S. (2012). Public debt overhangs: Advanced-
economy episodes since 1800, Journal of Economic Perspectives, 26 (3), 69-86.
Ricardo, D. (1951). On the principles of political economy and taxation. In P. Sraffa (Ed.),
The works and correspondence of David Ricardo (Vol. 1).Cambridge, UK: Cambridge
University Press. (Original work published 1817)
Ricciuti, R. (2001). Assessing Ricardian equivalence. Società Italiana di Economia Pubblica.
Retrieved from http://www.siepweb.it/siep/images/joomd/1397927437048.pdf
Sachs, J. D. (1989). The debt overhang of developing countries. In G. A. Calvo, R. Findlay, P.
Kouri, & J. B. de Macedo (Eds.), Debt stabilization and development (pp. 80-102). Oxford,
UK: Basil Blackwell.
Schclarek, A. (2004). Debt and economic growth in developing and industrial countries (Lund
University Department of Economics Working Paper No. 34). Retrieved from http://portal.
research.lu.se/portal/files/5740791/2061440
Seater, J. J. (1993). Ricardian equivalence. Journal of Economic Literature, 31, 142-190.
Seater, J. J., & Mariano, R. S. (1985). New tests of the life cycle and tax discounting hypothesis.
Journal of Monetary Economics, 15, 196-215.
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations (W. Stahan &
T. Cadell, Eds.). London, England. London: Uninted Kingdom. MetaLibri Digital Library,
pp. 1-754.
Soydan, A., & Bedir, S. (2015). External debt and economic growth: New evidence for an old
debate. Journal of Business Economics and Finance, 4, 500-522.
Szabo, Z. (2013). The effect of sovereign debt on economic growth and economic develop-
ment. Retrieved from https://www.asz.hu/storage/files/files/public-finance-quarterly
-articles/2013/a_szabo_2013_3.pdf
Uzun, A., Kabadayi, B., & Emsen, O. S. (2012). The impacts of external debt on economic
growth in transition economies. Chinese Business Review, 11, 491-499.
Wagner, A. (1893). Grundlegung der Politischen Okonomie [Text and Handbook of Political
Economy] (3rd ed.). Leipzig, Germany: C. F. Winter.
Wagner, A. (1911). Staat in nationalökonomischer [The state in Economic Perspective] Hinsicht.
In Gustav Fisher (ed.) Handwörterbuch der Staatswissenschaften (3rd ed., pp. 743-745).
Jena, Germany: Lexispp.