Economics, Econometrics and Finance
8 years ago

Optimal Debt Ratio for Economic Growth Identified: 38.4% for Public Debt

Contemporary Economic Policy
IN SEARCH OF AN OPTIMAL DEBT RATIO FOR ECONOMIC GROWTH
David J. Smyth, Yu Hsing

Paper Summary

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The article explores if there is an ideal amount of debt that can help a country's economy grow the most. By looking at data from 1960 to 1991, the researchers found that having a debt ratio of around 38.4% for public debt and 48.9% for total debt is best for economic growth. Currently, the public debt ratio is 50.9% and total debt ratio is 68.2%, which is higher than the recommended levels.