Abstract
Public debt is often widely used during economic recessions to provide additional financial support for expansionary fiscal expenditures. Based on the macroeconomic data of 54 advanced and emerging market economies, this paper reveals that public debt booms during recessions have a nonlinear impact on economic growth. Initially, the impact appears weakly positive because additional debt financing supports a more expansionary fiscal policy. However, as the debt escalation leads to fiscal imbalances, fiscal consolidation becomes an involuntary endeavour, and its impact on economic growth turns negative subsequently. Moreover, this effect is particularly severe for emerging market economies and heavily indebted economies.
| Original language | English |
|---|---|
| Pages (from-to) | 2794-2798 |
| Number of pages | 5 |
| Journal | Applied Economics Letters |
| Volume | 32 |
| Issue number | 19 |
| DOIs | |
| State | Published - 2025 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth
Keywords
- Public debt booms
- expansionary fiscal policy
- fiscal imbalances
- local projection
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