Growth Effect Of Government Debt

Since the 1970 s,the debt of various countries has been expanding,and the impact of debt on economic development is worth studying.For developing countries,borrowing government debt can make up for insufficient domestic market funds and promote technological progress;On the other hand,excessive debt can have a crowding out effect on private borrowing,leading to an increase in interest rates and affecting the normal operation of financial markets.In recent years,the debt of governments around the world has been continuously expanding,leading to serious economic crises such as the European debt crisis.Debt has both advantages and disadvantages for a country’s development.More and more literature supports the view that debt threshold levels exceed a certain threshold,and government debt begins to hinder economic growth.However,the estimated thresholds vary greatly among different studies,and there is no single turning point that can be applied to all countries,requiring appropriate investigation of the factors that affect the impact of debt on growth.Therefore,studying the threshold of government debt on economic growth has important practical significance.This study aims to investigate whether the level of debt threshold depends on government efficiency and trade balance.We use SYS-GMM to estimate the panel data of 63 countries from 2000 to 2020,and use two strategies:(1)divide the sample into sub samples according to trade balance and government efficiency,and(2)include the interaction between government debt and government efficiency,government debt and trade deficit.The results obtained are consistent with the results confirming an inverted U-shaped relationship between debt growth,and the debt threshold clearly depends on government efficiency.At the same time,the government’s trade balance plays a more important role.Therefore,the inspiration drawn from this article is that the decision of the government to borrow debt is one of the important factors for economic growth.The threshold of government debt depends on government efficiency and trade balance.Efficient and export-oriented governments have higher debt thresholds,improving government governance efficiency and promoting the transformation of an export-oriented economy can increase the government debt threshold and reduce the negative impact of debt on the economy.