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Government Debt and Economic Growth in OECD Countries: A Panel Data Analysis
Dalarna University, School of Culture and Society.
2025 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This thesis examines the effect of government debt on real GDP growth across OECD countries over the period 2000–2024. Using a panel data framework and Fixed Effects (FE) estimation with clustered standard errors, we control for country-specific characteristics and common timeshocks. The main independent variable is the debt-to-GDP ratio, while control variables include inflation, investment, unemployment, government expenditure, population, and trade openness. Our findings suggest that higher government debt levels are not significantly associated with lower GDP growth across the 38 OECD countries during this period. The results remain robust across model specifications and contrast with earlier studies that warned of severe growth penalties at high debt levels. While the analysis is limited to a linear specification and does not explore potential non-linear threshold effects, the findings indicate that moderate to high debt levels, in the context of OECD economies, did not systematically hinder growth between 2000 and 2024. These results contribute to the broader debt-growth literature and suggest that context, institutions, and macroeconomic conditions play an important role in shaping the effects of public debt on economic performance.

Place, publisher, year, edition, pages
2025.
Keywords [en]
Government debt; GDP growth; Fixed effects; Panel data; OECD countries; Public finance; Economic growth determinants
National Category
Economics
Identifiers
URN: urn:nbn:se:du-50986OAI: oai:DiVA.org:du-50986DiVA, id: diva2:1986832
Subject / course
Economics
Available from: 2025-08-04 Created: 2025-08-04 Last updated: 2025-10-09

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • chicago-author-date
  • chicago-note-bibliography
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf