The impact of government debt on economic growth: An empirical investigation of the Greek market

Abstract

This paper investigates the relationship between the government debt and economic growth using Greek data for about 40 years starting in 1970, taking into consideration the different levels of economic growth in Greece during the examined period. The empirical results suggest a positive and statistically significant impact of debt on GDP growth. In our estimation of the growth equation we also include other variables such as: 1) the fiscal policy indicators affecting economic growth, 2) the indicators of the openness of the economy and the external competitiveness and 3) other control variables related to the demographic characteristics of the economy as well as indicators of its ability to invest and in the short run finance its expenses.