Economics, Econometrics and Finance
4 years ago

High Government Debt Stifles Economic Growth, Urgent Need for Prudent Policies.

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SSRN Electronic Journal
The Impact of High and Growing Government Debt on Economic Growth: An Empirical Investigation for the Euro Area
Cristina Checherita‐Westphal, Philipp Rother

Paper Summary

High government debt can harm economic growth. A study on euro area countries from 1970-2010 found that when debt reaches 90-100% of GDP, growth suffers. Even at 70-80% of GDP, growth can be affected. Rising debt and budget deficits also slow down growth. This happens because high debt levels impact private saving, public investment, productivity, and interest rates. To boost long-term growth, reducing debt is crucial.

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