Public debt and economic growth in G7 countries: do financial and political institutions matter?

OpenAlex English

This research aims to examine the role of institutional factors in the public debt-economic growth (PD-EG) nexus using data from 1984 to 2019 for G7 countries, constituting approximately 55% of the global public debt stock. The findings of this study, in which current panel time-series techniques are adopted, show that the PD-EG interaction can be in the form of an inverted U (Italy and UK) or U shape (Germany and U.S.A.) and that institutional factors do not generate effects in the same direction for some countries (Canada, France, and Japan). Moreover, the findings provide robust evidence that the threshold values of the PD-EG relationship may be lower in the presence of institutional factors. In this regard, we argue that just as neither a threshold value nor an effect can be accepted as generally valid in the PD-EG relationship, a similar result is valid for modelling that includes theoretical factors.