Abstract
This study examines the question: how does government debt affect economic growth over time? The results of this research show that low-income countries use inflation, money growth, and borrowing to manage debt. As a group, high-income countries do not, or perhaps cannot, use any of these methods systematically. Theory indicates that countries may turn to money growth and inflation to manage debt levels, and that this in turn decreases growth of gross domestic product. The results of this paper are significant because they suggest that low-income countries use money growth and inflation as an alternative to taxation while simultaneously borrowing to finance government expenditures. This study also finds evidence that, in the short-run of five years, there is a negative relationship between the change of debt/GDP and growth of GDP in the following years, but the size of the impact is relatively small.
Recommended Citation
Wright, Jesse T.
(2024)
"Government Debt on Money Growth, Inflation, and Real GDP Growth,"
Journal of Business, Industry, and Economics: Vol. 29, Article 2.
Available at:
https://roar.una.edu/jobie/vol29/iss1/2