Abstract
The multiple attempts at empirical evidence, yet recent, fail to truly dispel the theoretical vagueness of the effects of public debt on economic growth. The aim of this work is to demonstrate that public overindebtedness negatively impacts economic activity in developing countries. From estimation by the generalized moments’ method in the system of the relationship between economic growth and outstanding public debt on data of the Gabonese economy, we get that an increase in the public debt in this country, causes a deceleration of economic activity, thus reflecting a scissor effect between public debt trend and that of economic growth.
Highlights
Unconventional economic policies used to curb economic and financial crises seem to favour the public overindebtedness of economies [1]
The use of excessive public debt poses a problem of economic efficiency in relation to the heavy consecutive tax burden and uncertainty about future tax conditions and the extent of public services that will be available in the future
The one that reaffirms with new Keynesian arguments, that the public debt is an additional means for households to smooth their consumption
Summary
Unconventional economic policies used to curb economic and financial crises seem to favour the public overindebtedness of economies [1]. The consequences of such behaviour on economic activity exacerbate discussions about the role of public debt. In this light, the use of excessive public debt poses a problem of economic efficiency in relation to the heavy consecutive tax burden and uncertainty about future tax conditions and the extent of public services that will be available in the future. The one that reaffirms with new Keynesian arguments, that the public debt is an additional means for households to smooth their consumption. Bidzo [2] [3], on the one hand, and to reduce the costs of macroeconomic fluctuations that exacerbate the idiosyncratic risk of non-insurable income, thereby altering the need and cost of precautionary savings [4], on the other hand
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