The Effect of Public Debt on Economic Growth: A Cross-Country Analysis of Advanced and Emerging Economies

The thesis examines the relationship between public debt and economic growth, focusing on differences between advanced and emerging economies. It first reviews the main theoretical approaches and empirical literature on public debt, growth, debt tolerance, financing conditions, and institutional differences. The empirical part uses a cross-country panel dataset of selected advanced and emerging economies for the period 2000–2024, based on data from the IMF World Economic Outlook and the World Bank World Development Indicators. The analysis applies descriptive statistics, correlation analysis, regression models, and robustness checks to evaluate whether public debt-to-GDP is associated with real GDP growth and whether this relationship differs between the two country groups. The results suggest that higher public debt-to-GDP is negatively associated with real GDP growth in the baseline analysis, although this relationship is not fully robust across all specifications. The evidence is stronger for the conclusion that the debt-growth relationship differs between advanced and emerging economies, with emerging economies showing a stronger negative association in the fixed-effects interaction model.