Abstract
The study examines the peculiarities of the impact of public debt on the economic growth of states. The aim of the study was to analyze and identify the determinants of the impact of government borrowing on economic growth. The following research methods have been applied: analysis and synthesis of data and theoretical work, comparative analysis, statistical, correlation, cluster and discriminant analysis. According to the results of the survey, it is established that the growth of government borrowing can have both a negative and a positive effect on the economy, provided that it implements as the share of government debt to GDP, does not exceed 60% and is implemented in the form of financial investments (golden rule of public finance). The state’s deficit is allowed provided that state assets grow; current income from investment fully covers current expenses. The results of clusterization allowed to allocate 3 groups of states: states that demonstrated the economic downturn; states characterized by slow economic growth; states that were characterized by high level of economic growth. The first group of states (the countries with economic downturn) observed a negative high level of government debt and GDP. The results showed the low level of domestic borrowing development in low and middle income countries, which in developed countries allows governments to finance the investment projects on the basis of local loans (municipal bonds, infrastructure bonds, mainly medium and long-term), increase the debt burden in terms of economic recession.
Highlights
According to the results of the survey, it is established that the growth of government borrowing can have both a negative and a positive effect on the economy, provided that it implements as the share of government debt to GDP, does not exceed 60% and is implemented in the form of financial investments
The results showed the low level of domestic borrowing development in low and middle income countries, which in developed countries allows governments to finance the investment projects on the basis of local loans, increase the debt burden in terms of economic recession
The transformational changes in the economies of the EU, America, Asia, and Africa connected with the achievement of the goals of sustainable development in a context of slowing economic growth and financial crises have led to a shift in approaches to managing goverment debt towards the development of the domestic borrowing market
Summary
The transformational changes in the economies of the EU, America, Asia, and Africa connected with the achievement of the goals of sustainable development in a context of slowing economic growth and financial crises have led to a shift in approaches to managing goverment debt towards the development of the domestic borrowing market. Debt policy is aimed at stimulating and attracting domestic loans in the form of municipal bonds, medium and long-term infrastructure bonds and, at the same time, reducing foreign loans, which have a negative impact on economic growth In this case, it is important that when placing bonds, the advantage is given to long-term borrowings in the national currency that are held on the domestic market.
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