Mudayen, Yohanes Ma ia Vianey; A syad, Lincolin; P adip yo, Rimawan; Se ias u i,
Seka U ami
A icle
Does public deb encou age economic g ow h? An
applica ion o quan ile eg essions o panel da a o
de eloping coun ies
Economies
P o ided in Coope a ion wi h:
MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel
Sugges ed Ci a ion: Mudayen, Yohanes Ma ia Vianey; A syad, Lincolin; P adip yo, Rimawan;
Se ias u i, Seka U ami (2025) : Does public deb encou age economic g ow h? An applica ion o
quan ile eg essions o panel da a o de eloping coun ies, Economies, ISSN 2227-7099, MDPI,
Basel, Vol. 13, Iss. 4, pp. 1-31,
h ps://doi.o g/10.3390/economies13040113
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/329393
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h ps://c ea i ecommons.o g/licenses/by/4.0/
Academic Edi o : B uce Mo ley
Recei ed: 31 Janua y 2025
Re ised: 30 Ma ch 2025
Accep ed: 3 Ap il 2025
Published: 21 Ap il 2025
Ci a ion: Mudayen, Y. M. V., A syad,
L., P adip yo, R., & Se ias u i, S. U.
(2025). Does Public Deb Encou age
Economic G ow h? An Applica ion o
Quan ile Reg essions o Panel Da a o
De eloping Coun ies. Economies,
13(4), 113. h ps://doi.o g/10.3390/
economies13040113
Copy igh : © 2025 by he au ho s.
Licensee MDPI, Basel, Swi ze land.
This a icle is an open access a icle
dis ibu ed unde he e ms and
condi ions o he C ea i e Commons
A ibu ion (CC BY) license
(h ps://c ea i ecommons.o g/
licenses/by/4.0/).
A icle
Does Public Deb Encou age Economic G ow h? An Applica ion
o Quan ile Reg essions o Panel Da a o De eloping Coun ies
Yohanes Ma ia Vianey Mudayen 1,2,*, Lincolin A syad 2, Rimawan P adip yo 2and Seka U ami Se ias u i 2
1Economic Educa ion, Sana a Dha ma Uni e si y, Yogyaka a 55281, Indonesia
2Facul y o Economics and Business, Gadjah Mada Uni e si y, Yogyaka a 55281, Indonesia;
[email p o ec ed] (L.A.); [email p o ec ed] (R.P.); [email p o ec ed] (S.U.S.)
*Co espondence: [email p o ec ed]
Abs ac : P e ious s udies on he ela ionship be ween go e nmen deb and economic
g ow h ha e p oduced e y di e se indings. This s udy examines he ela ionship be ween
public deb and economic g ow h in de eloping coun ies using a quan ile eg ession
app oach wi h ixed e ec s and boo s apping on he 10% o 90% quan ile dis ibu ion.
The quan ile g ouping is based on speci ic pe cen iles o economic g ow h in de eloping
coun ies. This s udy uses panel da a om 127 de eloping coun ies o he pe iod 2012 o
2019. Da a we e ob ained om he Wo ld De elopmen Indica o s, he Wo ld Bank, and
T anspa ency In e na ional. The esul s o his s udy indica e ha public deb is no iendly
o economic g ow h. Public deb ac ually hinde s economic g ow h in de eloping coun ies,
especially in he 30% o 90% quan ile. O he ac o s ha in luence economic g ow h in
de eloping coun ies a e ade, in la ion a es, go e nmen spending, co up ion, and ne
o eign di ec in es men . T ade and ne di ec in es men signi ican ly inc ease economic
g ow h in de eloping coun ies. Meanwhile, public deb , he in la ion a e, go e nmen
spending, and co up ion ac ually inhibi economic g ow h in de eloping coun ies. On he
o he hand, educa ion spending, p i a e deb , ax e enues, and labo o ce pa icipa ion
do no con ibu e signi ican ly o economic g ow h in de eloping coun ies. These ind-
ings con i m ha public deb go e nance and go e nance a e e y impo an in d i ing
economic g ow h in de eloping coun ies. This pape p o ides empi ical and policy con i-
bu ions o he assessmen o ins i u ional e ec i eness in ela ion o he impac o public
deb managemen on economic g ow h in de eloping coun ies.
Keywo ds: public deb ; economic g ow h; quan ile eg ession; ixed e ec s; boo s apping
1. In oduc ion
The indings o se e al s udies on he ela ionship be ween public deb and economic
g ow h a e expanded upon in his s udy (Augus ine & Ra i,2023;Gu e al.,2022;Mo ei a,
2005;Mqolombeni e al.,2023;Musa e al.,2023;Quazi,2005;Reinha & Rogo ,2010;
Shaa i e al.,2023). Resea ch is especially needed o de e mine how public deb a ec s
economic g ow h in de eloping na ions. Public deb is deb ha a na ion’s go e nmen
issues o gua an ees (Bank Indonesia,2021).
Public deb aises a ious deba es among academics and p ac i ione s. Deb can
encou age economic de elopmen h ough in as uc u e de elopmen and educa ion
(Mo ei a,2005;Liu e al.,2021). Deb can also be an economic policy ins umen o p e en
he nega i e e ec s o business cycle luc ua ions. The issuance o deb secu i ies can
s imula e eme ging bond and co po a e ma ke s (Mo ei a,2005;Liu e al.,2021).
Economies 2025,13, 113 h ps://doi.o g/10.3390/economies13040113
Economies 2025,13, 113 2 o 31
Howe e , se e al s udies show ha public deb can gi e ise o a c owding-ou e ec
(Gu e al.,2022;Sandow e al.,2022). Public deb will impac cu ency de alua ion. Deb is
highly ulne able o capi al ligh (Gu e al.,2022;Sandow e al.,2022;Augus ine & Ra i,
2023). Deb has eme ged as a signi ican ba ie o economic eco e y in weal hy na ions
a e he 2008 inancial c isis (Egge sson & K ugman,2012;Gu e al.,2022).
The in e se U-shaped ela ionship be ween public and p i a e deb and economic de-
elopmen is explained by a numbe o empi ical s udies (Cecche i e al.,2011;Cheche i a-
Wes phal & Ro he ,2012;Reinha e al.,2012;A cand e al.,2015). Howe e , o he esea ch
indica es ha when compa ing mul iple na ions, he co ela ion be ween public deb and
economic g ow h is weake . The e a e signi ican na ional di e ences in he link be ween
deb and long- e m economic g ow h, and i can be ei he linea o nonlinea (Chen e al.,
2024;Chudik e al.,2017;Ebe ha d & P esbi e o,2015;Mqolombeni e al.,2023;Musa e al.,
2023;Shaa i e al.,2023).
Se e al empi ical s udies ha e been conduc ed by Co della e al. (2010), Cheche i a-
Wes phal and Ro he (2012), Kou ellos e al. (2013), Panizza and P esbi e o (2014), and
Ebe ha d and P esbi e o (2015) using s anda d neoclassical g ow h models o examine
he ela ionship be ween deb and economic g ow h. Ebe ha d and P esbi e o’s (2015)
s udy on 118 de eloping and de eloped coun ies shows ha he long- e m deb coe icien
di e s ac oss coun ies. Deb has a nega i e e ec on GDP in he long e m in coun ies
ha ha e a high deb a io.
S udies by Al-Majali (2018), Ebe ha d and P esbi e o (2015); Em an and Fa azi (2009),
Heylen e al. (2013), G eine (2012a,2012b), Minea and Villieu (2010), Musa e al. (2023), and
She a and Kamaly (2014) asse ha he economy is nega i ely impac ed by he public deb
and budge de ici . Howe e , s udies conduc ed by Casa es (2015), Cheche i a-Wes phal
and Ro he (2012), G obe y (2018), Lin (2000), Teles and Mussolini (2014), and Yaki a (2008)
exp ess ha a na ion’s economy may be posi i ely o nega i ely impac ed by budge
de ici s and public deb .
S udies examining he impac o public deb using panel da a a e o en hampe ed
by wo main challenges, namely, coun y he e ogenei y and c oss-sec ional dependence.
In an e o o o e come hese obs acles, p e ious esea che s ha e adop ed a a ie y o
ele an econome ic echniques. Fo example, Chudik e al. (2013) de eloped he c oss-
sec ionally augmen ed dis ibu ed lag (CS-DL) me hod, which akes in o accoun he
in e connec edness be ween coun ies in he dis ibu ed lag analysis. Beqi aj e al. (2018)
chose he mean g oup eg ession and coin eg a ion eg ession app oaches o cap u e he
dynamics o he deb –g ow h ela ionship. As e iou e al. (2021) used a comp ehensi e
se o econome ic me hods, including he pooled mean g oup, mean g oup, dynamic
ixed e ec , and echniques o common co ela ed e ec s and he asymme ic panel
ARDL model.
Meanwhile, Gómez-Puig e al. (2022) chose he g ouped ixed e ec (GFE) es ima o
and he mul inomial logi model o iden i y ac o s ha d i e di e ences in cha ac e is ics
be ween obse a ion uni s. Kos a akos (2022) elied on he common co ela ed e ec s
mean g oup (CCE) es ima o de eloped by Pesa an (2006), combined wi h c oss-sec ional
a e ages o add ess he p oblem o in e -uni dependence. The s udy also compa ed
he esul s o he s anda d wo-way ixed e ec s es ima o , he pooled es ima o , he
“nai e” mean g oup es ima o om Pesa an and Smi h (1995), and he augmen ed mean
g oup (AMG) es ima o in oduced by Bond and Ebe ha d (2013). Fu he mo e, Ca elli
(2024) used he dynamic common co ela ed e ec s model o analyze he dynamics o he
ela ionship be ween a iables by conside ing he gene al co ela ion e ec .
Se e al s udies using panel da a examining he ela ionship be ween public deb ,
in la ion, and economic g ow h ha e yielded mixed indings. Chudik e al. (2013), who an-
Economies 2025,13, 113 3 o 31
alyzed da a om 40 coun ies o e he pe iod 1965–2010, concluded ha public deb and
in la ion signi ican ly hinde economic g ow h in he long un. Howe e , hey also ound
ha empo a y spikes in he deb - o-GDP a io a e no necessa ily nega i e, p o ided he
a io e u ns o no mal le els. Beqi aj e al. (2018), who ocused on 21 OECD coun ies
o e he pe iod 1991–2015, iden i ied a long- e m ela ionship be ween deb and s uc u al
p ima y balance. Meanwhile, As e iou e al. (2021) ound ha inc eases in go e nmen
deb we e consis en ly nega i ely co ela ed wi h economic g ow h, bo h in he sho and
long un, in selec ed Asian coun ies o e he pe iod 1980–2012.
Gómez-Puig e al. (2022) ound ha he nega i e impac o deb on economic g ow h
can be exace ba ed by high deb le els and sho deb ma u i ies, bu can be mi iga ed by
good ins i u ional quali y and p oduc i e alloca ion o spending. This s udy was conduc ed
in 115 coun ies du ing he pe iod 1995–2016. Kos a akos (2022) highligh ed he mo e
signi ican nega i e impac o public deb on public in es men , and iden i ied a nonlinea
ela ionship be ween deb and in es men . Meanwhile, Ca elli (2024) showed ha posi i e
shocks o public deb end o ha m p i a e sec o g ow h. Howe e , his nega i e impac
can be neu alized i he coun ies ha e implemen ed iscal consolida ion policies o he
p e ious i e yea s.
On he o he hand, he e a e se e al panel da a s udies ha use he quan ile eg ession
app oach; o example, Awan e al. (2022), Basse and Koenke (2017), Buchinsky (1994),
Cade and Noon (2003), Canay (2011), Chambe lain (1994), Che nozhuko e al. (2010),
He (1997), Koenke (2004), Koenke and Hallock (2001), Machado and Sil a (2019), and
Musa e al. (2023). In his a icle, we examine he ela ionship be ween public deb and
economic g ow h in 127 de eloping coun ies using he quan ile eg ession app oach wi h
ixed e ec s and boo s apping based on panel da a o he pe iod 2012–2019. De eloping
coun ies we e chosen as he uni o analysis because he le el o economic g ow h in
de eloping coun ies a ies g ea ly. Gi en ha he e a e s ill many a eas ha can be
de eloped, de eloping coun ies ha e a lo o oom o highe economic g ow h.
We selec ed 2012 as he s a o he esea ch pe iod because he measu emen o
co up ion as one o he a iables analyzed in his esea ch has used a new me hodology
since 2012. The di e ence in he me hodology o measu ing he Co up ion Pe cep ion
Index in 2012 compa ed o he p e ious pe iod mainly lies in he change in scale and da a
sou ces used. In 2012, T anspa ency In e na ional changed he Co up ion Pe cep ion
Index assessmen scale o 0–100, whe eas be o e 2012, he Co up ion Pe cep ion Index
used a scale o 0–10. Apa om changes in he scale, he e we e also changes in he da a
sou ces and su ey ques ions used. The su ey ques ions asked o esponden s in 2012
and he ea e gene ally placed a g ea e emphasis on issues o accoun abili y and public
se ice. This was pe o med o p o ide a mo e comp ehensi e pic u e o he pe cep ion o
co up ion in a coun y.
We selec ed 2019 as he end o he esea ch pe iod because ha yea was he end o he
no mal economic pe iod be o e he COVID-19 pandemic occu ed. The esea ch da a we e
selec ed du ing no mal economic imes wi h he conside a ion o analyzing mo e ca e ully
he e ec o public deb on economic g ow h. A e he COVID-19 pandemic occu ed,
he e was a la ge-scale inc ease in public deb in a ious coun ies. Howe e , he inc ease
in public deb du ing he COVID-19 pandemic was mos ly aimed a inancing he heal h
and educa ion sec o s and s abilizing he economy, no a encou aging economic g ow h.
The o iginal con ibu ion o his s udy lies in he use o a quan ile eg ession analy-
sis wi h ixed e ec s and boo s apping o mo e speci ically examine he e ec s o pub-
lic deb on economic g ow h in de eloping coun ies. P e ious s udies ha e used he
c oss-sec ionally augmen ed dis ibu ed lag me hod Chudik e al. (2013), he mean g oup
eg ession app oach and coin eg a ion eg ession (Beqi aj e al.,2018), common co ela ed
Economies 2025,13, 113 4 o 31
e ec s and asymme ic panel ARDL models (As e iou e al.,2021), he GMM app oach
(Cane e al.,2021), he g ouped ixed e ec (GFE) es ima o (Gómez-Puig e al.,2022),
common co ela ed e ec s mean g oup (Kos a akos,2022), au o eg essi e dis ibu ed lag
panel analysis (Shaa i e al.,2023), h eshold eg ession model (Augus ine & Ra i,2023),
and he dynamic common co ela ed e ec s model (Ca elli,2024). The new pe spec i e in
his s udy lies in he analysis o he e ec o public deb on economic g ow h in de eloping
coun ies ca ied ou a each eg ession quan ile wi h ixed e ec s and boo s apping, s a -
ing om he 10% quan ile o he 90% quan ile (Q1 o Q9). Boo s apping is a esampling
echnique using a compu e o es ima e he sampling dis ibu ion o s a is ics in o de o
ob ain no mally dis ibu ed esidual da a. A de ailed analysis o each quan ile has no been
pe o med by p e ious esea che s.
The ad an age o quan ile eg ession allowed us o analyze he e ec o public deb
on di e en quan iles o he economic g ow h dis ibu ion. This is especially impo an
because he e ec s o public deb may no be linea and can a y signi ican ly ac oss he
dis ibu ion o economic g ow h. Quan ile eg ession is mo e esis an o ou lie s because i
ocuses on he quan iles o he dis ibu ion, no he a e age, so ha he analysis esul s a e
mo e obus and eliable. Quan ile eg ession allows us o analyze he e ec o changing
public deb on di e en pa s o he economic g ow h dis ibu ion in mo e dep h han jus
looking a he a e age e ec .
The no el y o his esea ch is he use o quan ile eg ession analysis which is di ided
in o quan iles om 10% o 90% (Q1 o Q9). Quan ile eg ession was used in his s udy be-
cause o ou lie s and high da a di e si y among 127 de eloping coun ies in he
2012–2019
pe iod. The s udy o he pa e n o in luence o public deb on economic g ow h is sup-
po ed by g aphical isualiza ion o each a iable om 10% o 90% quan iles (Q1 o Q9).
The e o e, i is hoped ha his esea ch will p o ide bene i s o policy make s in de eloping
coun ies ega ding bes p ac ices o managing public deb o encou age economic g ow h.
Ano he no el y o his esea ch is he inclusion o go e nance a iables using he
Co up ion Pe cep ion Index p oxy. Va ious p e ious s udies did no include co up-
ion a iables o examine he ole o good go e nance in encou aging economic g ow h.
Apa om ha , his esea ch also analyzes he e ec s o ade, educa ion spending, in-
la ion a es, go e nmen spending, p i a e deb , axes, labo o ce pa icipa ion, and ne
o eign di ec in es men on economic g ow h in de eloping coun ies.
The emainde o his pape is laid ou as ollows. A li e a u e e iew and heo e ical
unde pinnings a e co e ed in Sec ion 2. The esea ch echnique is p esen ed in Sec ion 3.
The empi ical indings and discussion a e p esen ed in Sec ion 4. Conclusions and policy
p oposals a e inally p esen ed in Sec ion 5.
2. Theo e ical Backg ound and Li e a u e Re iew
The impac o public deb on economic g ow h is s ill a ho ly deba ed opic among
economis s. Views ega ding he ole o public deb in d i ing economic g ow h a y
depending on he economic pe spec i e used. Acco ding o Keynesians, go e nmen deb
can be a d i e o economic g ow h h ough inc eased in es men and job c ea ion. Keyne-
sians belie e ha public deb can igge a mul iplie e ec in u u e spending, which will
hen d i e economic g ow h h ough new in es men , job c ea ion, and demand s imulus
(Asp omou gos,2018;Cas elnuo o e al.,2018;Musa e al.,2023;Tempelman,2007).
In con as , classical and neo-classical economis s a gue ha go e nmen deb can
hinde economic g ow h in he long un because i causes inc eased in e es a es and
a c owding ou e ec . Classical and neo-classical economic heo is s c i icized he a gu-
men s o Keynesian heo y, s a ing ha public deb would only help du ing pe iods o c isis,
bu would igge an inc ease in in e es a es and a c owding ou e ec ha would cause
Economies 2025,13, 113 5 o 31
he p i a e sec o o expe ience capi al sho ages, and would ul ima ely a ec economic
g ow h in he long e m (Tsoul idis,2007;Ba ey e & Delalande,2020;Musa e al.,2023).
In he New Keynesian economic iew, go e nmen deb is conside ed an ins umen
ha can igge economic g ow h. P oponen s o he New Keynesian school a gue ha
h ough deb , he go e nmen can inance la ge-scale capi al p ojec s and in es men s.
This s ep will inc ease agg ega e demand in he economy. Acco ding o New Keyne-
sian heo is s, his mechanism wo ks h ough a mul iplie e ec , whe e each inc ease
in go e nmen spending will esul in a g ea e inc ease in o e all economic ou pu
(Musa e al.,2023)
. Thus, public deb is seen as an e ec i e ca alys o s imula e economic
ac i i y and d i e g ow h.
This s udy examines he ela ionship be ween deb and economic g ow h, based
on exis ing heo y and de eloping ecen empi ical s udies. Acco ding o Cane e al.
(2021), an inc ease in he go e nmen budge de ici ha occu s simul aneously wi h a
dec ease in GDP can lead o a highe public deb o GDP a io. Public deb ’s nega i e
impac on economic g ow h has been desc ibed by Reinha and Rogo (2010), Cheche i a-
Wes phal and Ro he (2012), Cane e al. (2010), and Cane e al. (2021). This nega i e
impac will be mo e p onounced i he la ge deb esul s in inancial ep ession in he
u u e (Coch ane,2011). Mo eo e , du ing he COVID-19 pandemic, all coun ies aced a
signi ican inc ease in public deb and a d as ic decline in GDP (Pjani´c & Mi aše i´c,2023).
Musa e al. (2023) ook a quan ile app oach h ough momen s using he e ogeneous panel
da a on 44 de eloping coun ies o he pe iod 1990 o 2000. The esul s o hei s udy show
ha public deb inhibi s economic g ow h in all quan iles.
Se e al p e ious s udies ha e ound ha s a e deb has he po en ial o p o ide an
impac ha suppo s economic de elopmen , especially i i is managed ca e ully and
i s use is di ec ed a p oduc i e ac i i ies. A s udy conduc ed in Nige ia by Yusu and
Mohd (2021) showed ha loans ob ained domes ically p o ed o be mo e e ec i e in
s imula ing economic g ow h compa ed o loans om ab oad, wi h he no e ha good deb
managemen is a c ucial ac o . Simila indings we e also ob ained by Saungweme and
Odhiambo (2019), who s udied condi ions in Zambia, whe e go e nmen deb was shown
o ha e a posi i e con ibu ion o he economy by suppo ing domes ic p oduc ion, capi al
o ma ion, and inc easing economic g ow h.
Va ious s udies examining he e ec o public deb on economic g ow h using c oss-
coun y panel da a ace econome ic challenges in he o m o coun y he e ogenei y
and c oss-sec ional dependence. In panel da a esea ch, Pesa an (2006) in oduced an
inno a i e me hod o es ima ion and in e ence o deal wi h models wi h mul i ac o
e o s uc u es. The s udy discusses wo impo an aspec s: he es ima ion o indi idual
explana o y a iable coe icien s and he es ima ion o he a e age o indi idual coe icien s
assumed o be andom. The p oposed es ima o is he common co ela ed e ec s (CCE)
es ima o . The CCE es ima o has an asymp o ic dis ibu ion ha is de i ed unde a ious
egula i y condi ions, ei he when he ime dimension (T) is ixed o when N and T go
o in ini y. One signi ican ad an age o he CCE mean g oup (CCEMG) es ima o is i s
obus ness o he numbe o unobse ed common ac o s, e en when N and T inc ease
simul aneously. The Mon e Ca lo expe imen al esul s con i m he heo e ical de i a ion
and show ha he combined es ima o has sa is ac o y pe o mance e en o ela i ely
small alues o N and T.
Kape anios e al. (2011) ex ended he wo k o Pesa an (2006) on a me hod ha u ilizes
c oss-sec ion means o p o ide alid in e ence in he case o s a iona y panel eg ession
wi h a mul i ac o e o s uc u e. They examined he impo an case whe e unobse ed
common ac o s ollow a uni oo p ocess using he CCE es ima o and Mon e Ca lo
expe imen s o he means. They showed ha he main esul o Pesa an (2006) con inues
Economies 2025,13, 113 6 o 31
o hold in he mo e gene al case. This is in e es ing, gi en he ac ha he e is usually
a la ge di e ence be ween he esul s ob ained o uni oo s and s a iona y p ocesses.
The Mon e Ca lo expe imen s also showed ha he CCE- ype es ima o is obus o a
numbe o de ia ions. Mos impo an ly, es s based on he CCE es ima o a e o he co ec
size, while he ac o -based es ima o p oposed by Bai (2009) shows conside able dis o ion
e en in he case o ela i ely la ge samples.
Chudik e al. (2013) in es iga ed he long- e m impac o public deb and in la ion on
economic g ow h. The s udy makes bo h heo e ical and empi ical con ibu ions. On he
heo e ical side, he s udy de elops a c oss-sec ionally augmen ed dis ibu ed lag (CS-DL)
app oach o es ima ing long- e m impac s in dynamic he e ogeneous panel da a models
wi h c oss-sec ionally dependen e o s. The ela i e ad an ages o he CS-DL app oach
a e illus a ed wi h small-sample e idence ia Mon e Ca lo simula ions. On he empi ical
side, using da a on a sample o 40 coun ies o e he pe iod 1965–2010, he s udy inds
signi ican long- e m nega i e impac s o public deb and in la ion on economic g ow h.
In e es ingly, i he deb - o-GDP a io is inc eased and he inc ease is pe manen , hen i
will ha e a nega i e impac on economic g ow h in he long un. Howe e , i he inc ease is
empo a y, he e is no long- e m g ow h e ec , as long as he deb - o-GDP a io is es o ed
o no mal le els. No uni e sal h eshold e ec was ound in he ela ionship be ween
public deb and g ow h.
Chudik and Pesa an (2015) ex ended he common co ela ed e ec s (CCE) app oach
de eloped by Pesa an (2006) o he e ogeneous panel da a models wi h lagged dependen
a iables and/o weakly exogenous eg esso s. The s udy showed ha he g oup-a e age
CCE es ima o emains alid bu he ollowing wo condi ions mus be me o handle
dynamics: a su icien numbe o lags o he c oss-sec ional a e ages mus be included in
he indi idual panel equa ions, and he numbe o c oss-sec ional a e ages mus be a leas
as la ge as he numbe o unobse ed common ac o s. The s udy es ablishes a consis ency
le el, de i es asymp o ic dis ibu ions, sugges s he use o co a ia es o handle he e ec s
o mul iple unobse ed common ac o s, and conside s ecu si e de-meaning and jackkni e
bias co ec ion p ocedu es o educe small-sample ime se ies bias. The heo e ical indings
we e accompanied by ex ensi e Mon e Ca lo expe imen s, which show ha he p oposed
es ima o pe o ms well as long as he dimension o he panel ime se ies is la ge enough.
Ebe ha d and P esbi e o (2015) examined he ela ionship be ween public deb and
economic g ow h wi h a ocus on he e ogenei y and nonlinea i y. This pape does no
explici ly use he CCE echnique in i s o iginal o m, bu adop s a e y lexible app oach
o accoun o unobse ed he e ogenei y, which is he main pu pose o CCE. The s udy
used he e o co ec ion model (ECM) and ac ional polynomial eg ession o cap u e
he complexi y o he deb –g ow h ela ionship. This app oach add esses he p oblem o
he e ogenei y in an adap i e way, simila o he spi i o CCE in dealing wi h common
unobse ed ac o s. The s udy concluded ha he ela ionship be ween public deb and
economic g ow h is complex and nonlinea . The e ec o public deb on economic g ow h
a ies signi ican ly ac oss coun ies and a di e en deb le els. The e a e nonlinea e -
ec s, whe e he impac o public deb on economic g ow h can change depending on he
deb le el.
In ano he s udy, Chudik e al. (2017) analyzed he e ec o deb h esholds on ou pu
g ow h using panel da a o 19 de eloped coun ies and 21 de eloping coun ies o he
pe iod 1965–2010. The s udy buil a model by aking in o accoun he endogenei y o
deb and g ow h, ixed e ec s, dynamics (homogeneous and he e ogeneous), and c oss-
sec ional e o dependence. The s udy discussed simul anei y bias, and ook in o accoun
he slope he e ogenei y in he unde lying ou pu and deb g ow h equa ions. The s udy
analyzed he long- e m e ec s o public deb accumula ion on economic g ow h using he
Economies 2025,13, 113 7 o 31
ARDL and DL speci ica ions discussed in Chudik and Pesa an (2015), as well as hei c oss-
sec ionally augmen ed e sions. The s udy used he ARDL and DL speci ica ions plus c oss-
sec ional a e ages, deno ed by CS-ARDL and CS-DL. A e aking in o accoun he impac
o global ac o s and spillo e e ec s, he s udy ound no e idence o a uni e sal h eshold
e ec in he ela ionship be ween public deb and economic g ow h. Howe e , he e was
a signi ican nega i e long- e m e ec o public deb accumula ion on ou pu g ow h.
Beqi aj e al. (2018) analyzed he go e nmen ’s eac ion o deb accumula ion and
examined whe he he go e nmen olun a ily akes co ec i e ac ions when he deb - o-
GDP a io s a s o inc ease o whe he i allows deb o inc ease. Using panel da a om
21 he e ogeneous OECD coun ies om 1991 o 2015, he s udy dis inguished be ween
disc e iona y and au oma ic esponses o he p ima y balance o go e nmen ac ions.
This s udy used mean g oup eg ession and coin eg a ion eg ession. The esul s showed
a sys ema ic long- e m ela ionship be ween deb and he s uc u al p ima y balance.
The go e nmen ’s long- e m disc e iona y esponse o an inc ease in he deb - o-GDP a io
was nega i e. This means ha he go e nmen did no ake long- e m ac ions o coun e ac
he inc ease in deb and did no sa is y he in e empo al budge cons ain . In he sho un,
he asymme ic iscal policy esponse exploi s he ou pu gap. The go e nmen in e enes
wi h de ici s and new deb when he ou pu gap is posi i e, bu does no make symme ic
co ec ions when he si ua ion e e ses.
As e iou e al. (2021) examined he ela ionship be ween public deb and sho - e m
and long- e m economic g ow h in selec ed Asian coun ies o he pe iod 1980–2012.
The s udy used se e al econome ic me hods: pooled a e age g oup, a e age g oup, and
dynamic ixed e ec s, and also ook in o accoun common co ela ed e ec s. The impac
o changes in public deb was also analyzed using he asymme ic panel ARDL me hod.
The esul s o he s udy showed ha inc easing go e nmen deb is nega i ely ela ed o
economic g ow h in bo h he sho and long e m.
Gómez-Puig e al. (2022) modeled he he e ogenei y o he deb –g ow h ela ionship
and he unde lying ac o s ha may explain i using panel da a om 115 coun ies o e
he pe iod 1995–2016. The g ouped ixed e ec (GFE) es ima o was used o endogenously
classi y coun ies in o g oups. The s udy also used a mul inomial logi model o explo e
he d i e s o he de ec ed he e ogenei y. The GFE es ima o classi ied coun ies in o i e
g oups whose deb has di e en impac s on economic g ow h. The esul s showed ha he
s ong impac o deb on economic g ow h is likely mode a ed by he quali y o ins i u ions
and he p opo ion o p oduc i e spending bu in ensi ied by he le el o deb and deb
ma u i y.
Kos a akos (2022) s udied he public deb –agg ega e in es men ela ionship ac oss a
numbe o Eu opean Union (EU) coun ies. The s udy used he CCE mean g oup es ima e
om Pesa an (2006) coupled wi h c oss-sec ional a e ages o obse able ac o s o il e
ou he impac o unobse ed ac o s. The s udy also used he s anda d wo-way ixed
e ec s es ima o , a pooled es ima o ha assumes ha ime- a ying he e ogenei y has a
common impac ac oss coun ies. In addi ion, he “nai e” mean g oup es ima o om
Pesa an and Smi h (1995) was used. The augmen ed mean g oup (AMG) es ima o in o-
duced in Bond and Ebe ha d (2013) was used o accoun o he he e ogeneous impac o
common unobse ed ac o s. The empi ical esul s showed ha public deb , on a e age,
has a signi ican ad e se impac on public in es men . Fu he mo e, he e was e idence o
sugges a nonlinea ela ionship be ween deb and in es men .
Ca elli (2024) used p ojec ions om he IMF Wo ld Economic Ou look (WEO)
da abase o explo e he ela ionship be ween public and p i a e deb by es ima ing he
esponse o p i a e ou pu o deb shocks in G7 coun ies o e he pe iod 2010–2021.
The p oblems o coe icien slope he e ogenei y and c oss-sec ional dependence we e ad-
Economies 2025,13, 113 8 o 31
d essed using he dynamic CCE model o analyze panel da a when he e is c oss-sec ional
dependence and unobse ed a iables ha a ec all c oss-sec ional uni s. The esul s
showed ha posi i e shocks in public deb a e de imen al o p i a e ou pu dynamics.
Howe e , he e ec is neu al i coun ies ha e ollowed a iscal consolida ion pa e n in he
p e ious i e yea s. The es ima es a he indi idual le el we e consis en wi h he gene al
indings, excep o a small g oup o coun ies. Al hough high deb le els a e associa ed
wi h a apid decline in he deb coe icien , nonlinea e ec s in he o m o a La e - ype
cu e seem unlikely.
Ca elli and T ec oci (2024) used da a om 167 coun ies du ing 1970–2019 o examine
he ela ionship be ween go e nmen deb and g ow h. In his s udy, se e al panel ea u es
we e used, especially asymme y, coin eg a ion, endogenei y, coun y he e ogenei y, and
c oss-sec ional dependence. This s udy used augmen ed Dickey–Fulle (ADF) eg ession
which adap ed he c oss-sec ionally implemen ed panel uni oo es (CIPS) es ing p o-
cedu e. The CIPS es , which is based on he c oss-sec ionally augmen ed Dickey–Fulle
(CADF) es , was used o es he s a iona i y in panel da a by conside ing c oss-sec ional
dependence. The pooled mean g oup (PMG) es ima o is be ween he dynamic ixed
e ec (DFE) es ima o and he mean g oup (MG) es ima o (Blackbu ne & F ank,2007;
Di zen,2018)
. The esul s o his s udy showed ha inc easing he deb pe wo ke is
de imen al o long- e m ou pu dynamics, bu nonlinea es ima es show ha changes in
go e nmen deb sp ead hei impac h ough di e en channels. The ea men o using
g oss and ne public deb in e changeably as deb measu es also yields di e en esul s.
Since he esul s o he analysis a e e y sensi i e o he model speci ica ion, we mus be
ca e ul in in e p e ing he esul s.
The e a e se e al o he s udies ha ha e used he CCE es ima o ; o example, Pesa an
and Tose i (2011) ex ended he CCE amewo k o include spa ial co ela ion, while Di zen
(2018) p o ides a p ac ical guide o implemen ing dynamic CCE using S a a so wa e
( e sion 13). Bal agi (2021) p o ides a comp ehensi e explana ion o panel da a analysis
me hods, including CCE. In addi ion, he e a e se e al o he s udies ha ha e used panel
da a; o example, He wa z and Siedenbu g (2008) conduc ed an analysis o poolabili y in
a panel wi h c oss-sec ional dependence, while Coakley e al. (2006) discussed he p oblem
o unobse ed he e ogenei y in panel ime-se ies models.
Chen e al. (2024) conduc ed a s udy using panel da a om 40 coun ies du ing he
pe iod 1980 o 2010. The s udy used he kink panel eg ession me hod wi h a la en g oup
s uc u e app oach o explo e he he e ogeneous h eshold e ec s o go e nmen deb on
economic g ow h based on p e iously unknown g oup pa e ns. The esul s o he s udy
e ealed ha he nonlinea ela ionship be ween go e nmen deb and economic g ow h is
cha ac e ized by he e ogeneous h eshold le els, which a y ac oss g oups o coun ies.
Augus ine and Ra i (2023) explo ed he nonlinea dynamics be ween public deb
and economic g ow h by es ima ing deb h eshold le els o 39 de eloping coun ies in
he pe iod 1980 o 2019. The s udy was conduc ed using a h eshold eg ession model
de eloped by Hansen (2000) so ha he h eshold alue could be de e mined in he model.
This s udy ound a ia ions in deb h esholds anging om 24 pe cen o 132 pe cen .
The ela ionship be ween public deb and economic g ow h in he o m o an in e ed U
only occu ed in six coun ies. The policy o expanding deb e en beyond he h eshold
ac ually encou aged economic g ow h in some coun ies, while deb hinde ed g ow h e en
a low deb le els in some coun ies.
Abbas e al. (2021) conduc ed a s udy on he media ing e ec o s a e go e nance on
he ela ionship be ween deb and na ional ou pu . Wi h WGI da a om 106 coun ies o
he pe iod 1996–2015, he s udy used ixed e ec s leas -squa e dummy a iables and GMM
es ima ion echniques o o e come endogenei y. The esul s o he s udy showed ha a
Economies 2025,13, 113 15 o 31
K
i
a e physical capi al in en o ies. G
i
e e s o public goods ha a e pu chased by
he go e nmen .
Economic p oduc i i y and e iciency can be in luenced by deb policy and go e nmen
go e nance (Abdullah e al.,2020;Assoum & Alinsa o,2023;Gani,2011;Khan,2007;No h,
1990;Olson e al.,2000;Woo,2009). Agg ega e ac o p oduc i i y can be w i en as ollows:
Ai =A0iexp(λZi )exp(µi )(5)
whe e
Zi =(go i )
,
go i
ep esen s le els o go e nmen , and
λ
is a ec o con aining
λ1
and
λ2
. Combining Equa ions (4) and (5) using he na u al loga i hm, we ob ain Equa ion (6)
as ollows:
yi =α0i+λZi +µi +αki +βli +(1−α−β)gi (6)
whe e y
i
,k
i
,l
i ,
and g
i
each ha e a loga i hm o Y, K, L, and G, whe eas
µi
is he e o
a e o coun y iin yea . This model assumes ha physical capi al accumula ion ollows
a p ocess
Ki =(1−δ)Ki −1+Ii
. By conside ing
→∞
, and le us ake as an example
ξ=1
η, he equa ion can be exp essed as ollows:
ki =[1−ξB]−1ii (7)
whe e
ii
deno es in es men and
ξ=1
η
, and
δ
ep esen he a e o capi al dep ecia ion.
The ope a o o he e e se shi is B. The ollowing long- e m pe capi a p oduc e olu ion
equa ion is p oduced by assuming con inuous labo g ow h and pu ing Equa ion (7) in o
Equa ion (6):
yi =α0+a0i(1−ξ)+ξyi −1+αii +σ +λgo i +µi +(1−α−β)gi −ξλgo i −1−ξµi −1−ξ(1−α−β)gi −1(8)
As a esul , he abo e model is dynamic s uc u ally. The ollowing Equa ion (8) can
be used o exp ess he e olu ion o p oduc pe capi a:
yi =β0+φyi −1+β1go i +β2gi +θXi +ρi+εi (9)
whe e
Xi
is a ec o o con ol ac o s, such as in es men
(ii )
, ha a ec income. The ixed
e ec
ρi
in Equa ion (9) akes in o accoun a na ion’s ini ial p oduc i i y (
A0i
) as well as
o he coun y-speci ic a iables. Na u al loga i hms can be used o o mula e he model in
he ollowing way:
lnyi =β0+φln(yi −1+β1go i +β2gi +θXi +ρi+εi (10)
The e o e, he model is dynamic, wi h
yi
,
go i
,
and gi
, ep esen ing pe capi a
income, go e nmen le el, and go e nmen expendi u e in he o m o public goods
expendi u es, espec i ely. Meanwhile, coun y i, ime dimension, coun y-speci ic ixed
e ec s, and e o a es a e indica ed by
i
,
,
ρi
,
and εi
. In his analysis, i= 1, 2, 3,
. . .
..127
and = 2012, 2013,
. . .. . .
, 2019. In addi ion, acco ding o se e al p e ious s udies, he ec o
Xi
in Equa ion (10) includes con ol a iables ha in luence income (Assoum & Alinsa o,2023).
3.4. Econome ic Model Speci ica ion
This s udy employed he me hods o K eme e al. (2013) and Seo and Shin (2016) in
o de o es ima e a mo e obus model. The K eme e al. (2013) me hod was used o e i y
he model’s obus ness. Equa ion (10) was u ilized o de i e he model o he dynamic
panel h eshold o Seo and Shin (2016) as ollows:
Economies 2025,13, 113 16 o 31
lnyi =β01 +φ1lnyi −1+β11Deb i +β21go i +θ1Xi I(go i ≤γ)+β02 +φ2lnyi −1+
β12Deb i +β22go i +θ2Xi )I(go i >γ)+ρi+εi
(11)
whe e he unc ion indica o is deno ed as I(.), he ansi ion a iable as
go i
, and he
h eshold pa ame e as
γ
. The ollowing model was employed in K eme e al. (2013)’s
dynamic panel h eshold amewo k:
lnyi =φ1lnyi −1+δ1Deb i I(go i ≤γ)+δ2Deb i I(go i >γ)+θXi +ρi+εi (12)
whe e
go i
is he ansi ion a iable,
γ
is he h eshold pa ame e , and I(.) is he indica o
unc ion. The Cane e al. (2021) model se ed as he basis o his esea ch model, which is
as ollows:
yi =αi+Ψyi, −1+Γ′Di +Φ111{qi ≤γ}+Φ211{qi >γ}+Φ12xi 1{qi ≤γ}+Φ′22xi 1{qi >γ}+ i (13)
whe e coun ies and ime pe iods a e indica ed as i= 1, 2, 3,
. . .
, n and = 1, 2, 3,
. . .
, T does
no need o be dele ed because in his s udy indica es he yea s 2012–2019, espec i ely.
The GDP g ow h a e is he dependen a iable, and he alues o he explana o y a iables
a e lagged. The economic g ow h model in his esea ch is as ollows:
G ow hi = ai+Ø1.1T adei +Ø1.2Edui +Ø1.3In la ioni +Ø1.4Go . Consump ioni +Ø1.5P i a e Deb i -1 +
Ø1.6Public Deb i -1 +Ø1.7Co up ioni +Ø1.8Taxi +Ø1.9LFPi +Ø1.10Ii +ui
(14)
In his s udy, we modi ied he Cane e al. (2021) model by emo ing he a iables
household deb , co po a e deb , banking c isis dummy, and pension unds, and adding he
a iables co up ion, labo o ce pa icipa ion, and ne o eign di ec in es men . This ac ion
was ca ied ou in o de o de elop a esea ch model ha was app op ia e o he a ailable
da a and elimina e ac o s ha we e conside ed insigni ican based on p e ious indings.
The analysis o he e ec o public deb on economic g ow h in de eloping coun ies
was ca ied ou using he econome ic app oach o quan ile eg ession wi h ixed e ec s
and boo s apping. Quan ile eg ession o e s signi ican ad an ages o e con en ional
eg ession me hods, especially wi h ixed e ec s and conside ing he model used in his
s udy. This esea ch model includes a ious de e minan s o economic g ow h, exposing
he complexi y o he ela ionship be ween a iables, whe e he e ec o public deb
was likely no uni o m ac oss he g ow h dis ibu ion. Quan ile eg ession allowed us o
b eak down his he e ogenei y by analyzing he e ec o deb a a ious g ow h quan iles,
hus p o iding a mo e de ailed pic u e han jus he a e age e ec .
In a s udy o he e ec s o public deb on economic g ow h in 127 de eloping coun ies
o he pe iod 2012–2019, quan ile eg ession wi h ixed e ec s and boo s apping we e
used sequen ially and in an in eg a ed manne o o e come he challenges o coun y
he e ogenei y and c oss-sec ional dependency. Fi s , quan ile eg ession was applied o
analyze how he e ec s o public deb a y ac oss di e en le els o economic g ow h.
This was ca ied ou by di iding he dis ibu ion o economic g ow h in o a ious s a ing
quan iles and es ima ing he e ec s o public deb a each quan ile. Thus, we could see
whe he he e ec s o public deb di e ac oss coun ies wi h low, medium, and high
economic g ow h.
Second, ixed e ec s we e in oduced in o he quan ile eg ession model o con ol o
unobse ed bu cons an coun y he e ogenei y o e ime. Fixed e ec s elimina ed c oss-
coun y a ia ion caused by ac o s, such as ins i u ional, cul u al, o policy di e ences,
ha do no change o e he s udy pe iod. This ea men can educe bias caused by coun y
he e ogenei y and allowed us o ocus on he ue e ec s o public deb .
Economies 2025,13, 113 17 o 31
Thi d, boo s apping was used o add ess he p oblem o c oss-sec ional dependency
and iola ion o he no mal dis ibu ion assump ion. Boo s apping is a esampling ech-
nique ha allows esea che s o es ima e he sampling dis ibu ion o a es s a is ic wi hou
ha ing o make any pa icula dis ibu ional assump ions. In his con ex , boo s apping
was pe o med by esampling he da a wi h eplacemen and es ima ing a quan ile e-
g ession model wi h ixed e ec s on each esample. This ea men p oduced an empi ical
dis ibu ion o he eg ession coe icien s, which was hen used o calcula e mo e accu a e
s anda d e o s and con idence in e als.
App op ia e boo s apping echniques, such as block boo s apping, can be used o
add ess c oss-sec ional dependency while p ese ing he dependence s uc u e in he da a.
This ea men is pe o med by esampling adjacen blocks o obse a ions a he han
indi idual obse a ions. By combining quan ile eg ession, ixed e ec s, and boo s apping,
we could ob ain mo e obus and accu a e es ima es o he e ec s o public deb on economic
g ow h in de eloping coun ies. This app oach allowed us o examine he e ec s o public
deb a di e en le els o economic g ow h, con ol o coun y he e ogenei y, and o e come
s a is ical p oblems common o mac oeconomic da a.
4. Empi ical Resul s and Discussion
An empi ical model e i ica ion was ca ied ou using quan ile eg ession. Quan ile
eg ession was used in his s udy because he e was e y high da a a ia ion o all
a iables. This me hod di ides da a in o ce ain quan iles, which a e hough o ha e
di e en es ima ed alues.
Quan ile eg ession is e y use ul o da a dis ibu ions ha a e no homogeneous and
do no ha e a s anda d shape, such as hose showing asymme y o ails in he dis ibu ion
(Koenke & Basse ,1978). In quan ile eg ession, esampling o boo s apping is ca ied
ou and he coe icien s o med a e obus agains iola ions o assump ions because hey
do no use he o dina y leas squa es p inciple, so he e is no need o es s a iona i y,
mul icollinea i y, and au oco ela ion. Table 2shows he o e all indings using quan ile
eg ession analysis:
Table 2. The e ec o public deb on economic g ow h in de eloping coun ies using quan ile
eg ession wi h ixed e ec s and boo s apping.
Fixed E ec s and Boo s apping
Va iabel Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9
T ade 0.007
(0.881)
0.024
(0.603)
0.034
(0.377)
0.045
(0.158)
0.055 *
(0.068)
0.064 **
(0.040)
0.075 ***
(0.000)
0.088 ***
(0.001)
0.109 *
(0.059)
Educa ion
expendi u e
−0.032
(0.890)
−0.080
(0.754)
−0.111
(0.492)
−0.140
(0.335)
−0.170
(0.334)
−0.196
(0.517)
−0.229
(0.423)
−0.266
(0.425)
−0.325
(0.499)
In la ion −0.028
(0.754)
−0.043
(0.587)
−0.053
(0.932)
−0.062
(0.159)
−0.071 **
(0.041)
−0.080 **
(0.028)
−0.090 ***
(0.000)
−0.101 ***
(0.000)
0.120 ***
(0.000)
Go e nmen
expendi u e
−0.193
(0.233)
−0.338 **
(0.020)
−0.432 ***
(0.004)
−0.520 **
(0.027)
−0.610 *
(0.054)
−0.689
(0.106)
−0.788 *
(0.086)
−0.899
(0.149)
−1.079
(0.168)
P i a e deb -1 −0.042 **
(0.032)
−0.036
(0.104)
−0.031
(0.156)
−0.027
(0.388)
−0.022
(0.458)
−0.019
(0.574)
−0.014
(0.719)
−0.009
(0.852)
0.000
(1.000)
Public deb
-1
−0.022
(0.341)
−0.033
(0.263)
−0.041 *
(0.073)
−0.048 **
(0.016)
−0.055 **
(0.030)
−0.061 *
(0.090)
−0.069 *
(0.079)
−0.078 **
(0.036)
−0.092 **
(0.046)
Co up ion −0.072
(0.168)
−0.099
(0.028) **
−0.117 ***
(0.006)
−0.133 **
(0.013)
−0.150 *
(0.052)
−0.165 *
(0.086)
−0.183 *
(0.069)
−0.204 *
(0.081)
−0.237
(0.171)
Tax e enue 0.105
(0.182)
0.133
(0.237)
0.118
(0.320)
0.122
(0.267)
0.127
(0.491)
0.131
(0.323)
0.136
(0.451)
0.142
(0.345)
0.151
(0.426)
Economies 2025,13, 113 18 o 31
Table 2. Con .
Fixed E ec s and Boo s apping
Va iabel Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9
Labo Fo ce
Pa icipa ion
−0.017
(0.856)
0.032
(0.682)
0.063
(0.530)
0.093
(0.242)
0.123
(0.251)
0.149
(0.218)
0.182
(0.131)
0.219 **
(0.032)
0.280
(0.149)
Ne o eign di ec
in es men
ne o
165.69 ***
(0.000)
134.834 **
(0.000)
114.787
***
(0.000)
95.865 ***
(0.000)
76.757 ***
(0.000)
59.774 *
(0.051)
38.583
(0.354)
14.974
(0.811)
−23.475
(0.789)
Sou ce: seconda y da a, p ocessed 2024. No e: p obabili y alues enclosed in pa en hesis *** p< 0.01, ** p< 0.05,
*p< 0.10.
Table 2shows ha public deb in he pe iod s udied signi ican ly inhibi ed economic
g ow h in de eloping coun ies om he 30% o 90% quan ile. Public deb in he pe iod
signi ican ly a ec ed economic g ow h in all quan iles excep he 10% and 20% quan iles.
The esul s o his s udy con i m ha public deb ha is no managed p ope ly can ac ually
inhibi economic g ow h. The e a e se e al possible ac o s ha cause public deb o end
o inhibi economic g ow h a he 30% o 90% quan ile in de eloping coun ies, including
high deb in e es bu dens, c owding ou p i a e in es men , mac oeconomic ins abili y,
dependence on o eign deb , deb managemen quali y, and s uc u al ac o s.
De eloping coun ies o en ha e o pay highe in e es a es han de eloped coun ies
because o hei g ea e c edi isk. High in e es a es can educe budge alloca ions o
p oduc i e in es men s, such as in as uc u e and educa ion. Public deb can c owd
ou p i a e in es men . When go e nmen s bo ow hea ily, i can aise in e es a es,
making bo owing mo e expensi e o he p i a e sec o . As a esul , p i a e in es men
can decline, which in u n can hinde economic g ow h. High public deb can lead o
mac oeconomic ins abili y, such as in la ion and cu ency de alua ion. This ins abili y can
c ea e unce ain y o in es o s, which can educe in es men and economic g ow h.
Many de eloping coun ies ely hea ily on ex e nal deb , making hem ulne able o
exchange a e luc ua ions and global economic condi ions. When he domes ic cu ency
dep ecia es, he bu den o ex e nal deb in he domes ic cu ency inc eases, which can
bu den he go e nmen budge . In he pe iod 2012–2019, se e al de eloping coun ies had
high deb - o-GDP a ios, exceeding he sa e deb h eshold o 60%; o example, Albania
had a deb - o-GDP a io o 71.4%, Ba bados 132.5%, Bhu an 92.4%, Cabo Ve de 120.2%,
Colombia 63.9%, C oa ia 87.9%, Egyp 89.5%, and Hunga y 93.3%.
In he 30% o 90% quan ile, public deb hinde s economic g ow h, possibly also due
o poo deb managemen . Poo deb managemen , such as a lack o anspa ency and
accoun abili y, can inc ease he isk o de aul and inancial c isis. A inancial c isis can
cause se e e economic con ac ion and hinde economic g ow h. S uc u al ac o s, such as
co up ion, ine icien bu eauc acy, and lack o economic di e si ica ion, can exace ba e he
nega i e impac o public deb on economic g ow h.
The indings a he 30% o 90% quan ile suppo p e ious s udies conduc ed by
Reinha and Rogo (2010), Cheche i a-Wes phal and Ro he (2012), and Cane e al. (2021),
which showed a nega i e and nonlinea ela ionship be ween public deb and GDP g ow h.
Inc easing go e nmen deb c ea es unce ain y and inancial s ess in he u u e (Coch ane,
2011). I endogenous deb exceeds he deb ceiling, he go e nmen may need o ex end he
deb epaymen pe iod (Ghosh e al.,2013). Public deb has a long- e m nega i e impac on
economic g ow h, as shown by Ebe ha d and P esbi e o (2015). Due o limi ed iscal space,
high le els o go e nmen deb hampe he e ec i eness o p i a e sec o dele e aging
and slowed down economic eco e y du ing he global inancial c isis (Cane e al.,2021).
Economic de elopmen is nega i ely a ec ed by public deb , as shown by Cecche i e al.
Economies 2025,13, 113 19 o 31
(2011). The indings o Musa e al. (2023) showed ha public deb hinde s economic g ow h
a all quan iles.
O he ac o s ha a ec economic g ow h in de eloping coun ies include ade,
in la ion, go e nmen spending, p i a e deb , co up ion, labo o ce pa icipa ion, and ne
o eign di ec in es men . T ade signi ican ly inc eases economic g ow h in de eloping
coun ies in he 50% o 90% quan ile. This means ha de eloping coun ies in he middle o
uppe economic g oups (50% o 90% quan ile) expe ience signi ican inc eases in economic
g ow h due o in e na ional ade ac i i ies.
Se e al ac o s ha can explain hese indings include in as uc u e, p oduc ion
capaci y, ade policies, and human esou ces. De eloping coun ies in he middle o uppe
economic g oups (50% o 90% quan ile) usually ha e be e in as uc u e and p oduc ion
capaci y, so hey can ake ad an age o ade oppo uni ies mo e e ec i ely. These coun ies
may ha e mo e open and in es men - iendly ade policies, a ac ing mo e o eign ade
and in es men ac i i ies. These coun ies may also ha e be e human esou ce capabili ies,
so hey can p oduce goods and se ices ha a e compe i i e in he in e na ional ma ke .
O he ac o s ha cause ade o be a d i e o economic g ow h include specializa ion
and e iciency, inc eased access o ma ke s, echnology and knowledge ans e , inc eased
in es men , inc eased compe i ion, inc eased income, and economic di e si ica ion.
On he o he hand, in de eloping coun ies ha ha e economic g ow h in he 10%
o 40% quan ile g oup, ade does no ha e a signi ican e ec on economic g ow h.
This is likely due o se e al ac o s including he dependence o de eloping coun ies
in he quan ile on ce ain economic sec o s, such as ag icul u e and labo -in ensi e sec o s,
egional dispa i ies, logis ics ine iciencies, commodi y p ice ola ili y, p o ec ionis ade
policies by o he coun ies, and high le els o co up ion ha inc ease ansac ion cos s and
c ea e unce ain y.
The esul s o he s udy a he 50% o 90% quan iles s eng hen he indings o he
esea ch o Wu i e al. (2022) and Wu i (2024), which indica ed ha ade can d i e
economic expansion. Hummels e al. (2001) showed how a coun y’s in ol emen in
in e na ional p oduc ion ne wo ks co ela es wi h i s ade, specializa ion, and economic
g ow h.
Ge e al. (2020)
showed ha coun ies ha p io i ize imp o ing he quali y o hei
expo s will expe ience imp o emen s in hei ade balance, cu en accoun balance, and
economic expansion.
Educa ion expendi u e does no ha e a signi ican impac on economic g ow h in
de eloping coun ies a he 10% o 90% quan ile. Educa ion expendi u e does no ha e a
signi ican impac on all quan iles o economic g ow h dis ibu ion, which could be caused
by se e al complex ac o s, including a low quali y o educa ion, a misma ch be ween
educa ion ou pu and labo ma ke needs, p oblems o dispa i y in access o educa ion,
inequali y in educa ion quali y, and s uc u al and ins i u ional ac o s. The low quali y o
educa ion is igge ed by an i ele an cu iculum, an inadequa e quali y o educa ion, and
inadequa e educa ional acili ies. The misma ch be ween educa ion ou pu and he labo
ma ke occu s because he educa ion sys em does no p oduce g adua es wi h he skills
needed by he labo ma ke . A lack o collabo a ion be ween educa ional ins i u ions and
he p i a e sec o esul s in minimal abso p ion o g adua es by he p i a e sec o .
The p oblem o dispa i y in access o educa ion con ibu es o he ailu e o educa ion
spending o impac economic g ow h. Ma ginalized g oups, such as women, child en
om poo amilies, and u al popula ions, may ace ba ie s in accessing quali y educa ion.
This dispa i y in access leads o inequali y in human esou ce de elopmen . In addi ion, he
quali y o educa ion may di e signi ican ly be ween u ban and u al a eas, and be ween
public and p i a e schools, esul ing in g adua es who do no ha e he same compe i i e
quali ies. S uc u al and ins i u ional ac o s, such as co up ion in he educa ion sec o
Economies 2025,13, 113 20 o 31
and ine iciency and lack o accoun abili y, con ibu e o he ailu e o educa ion spending
o impac economic g ow h in de eloping coun ies. Fo example, in he case o Indonesia,
in he 2019 APBN, only IDR 21 illion o 4.3% o Indonesia’s o al educa ion budge o IDR
492.5 illion was alloca ed o educa ion in es men (Minis y o Finance o he Republic o
Indonesia,2020).
In la ion a es signi ican ly hampe economic g ow h in de eloping coun ies anging
om he 50% o 90% quan ile. High in la ion has a signi ican nega i e impac on economic
g ow h in de eloping coun ies. The e a e se e al ac o s ha cause high in la ion o ham-
pe economic g ow h, including alling p ices and in es men shocks, declining pu chasing
powe and consump ion le els, dis up ions in inancial ma ke s, dis o ions in esou ce
alloca ion, and declining compe i i eness. High in la ion c ea es a cloud o unce ain y
abou u u e p ices. In es o s end o shi unds o in la ion-sa e asse s, such as p ope y
o gold, which in u n hampe s economic g ow h.
In la ion causes a dec ease in consump ion and pu chasing powe . In la ion causes
shocks o inancial ma ke s in he o m o ising in e es a es and exchange a e ins abili y.
In addi ion, high in la ion can cause ins abili y in he domes ic cu ency exchange a e.
De eloping coun ies a e o en mo e dependen on impo s o basic necessi ies and aw
ma e ials. Global in la ion o dep ecia ion o he domes ic cu ency can cause a spike in
impo p ices, which wo sens domes ic in la ion. This can lead o g ea e ola ili y in p ices
and in e es a es. De eloping coun ies a e o en mo e ulne able o ex e nal shocks, such
as commodi y p ice luc ua ions o global inancial c ises. In la ion can exace ba e he
impac o hese shocks.
This inding suppo s he esul s o he s udies by Neg o and Sims (2015) in OECD
coun ies and Ramzan e al. (2023) in Pakis an ha coun ies acing se e e nega i e eco-
nomic shocks equi e economic policy suppo o con ol in la ion. This esul is consis en
wi h he gene al assump ion ha high in la ion has a nega i e impac on economic g ow h
in he long and sho e m (Jouini,2014). The e o e, o main ain he in la ion a e wi hin
a easonable ange, he in e ac ion o mone a y and iscal policies mus be ca ied ou
simul aneously. In con as , Da ku and Yeboah (2017) ound ha he in la ion a e and
income g ow h a e posi i ely co ela ed in high-income coun ies.
Go e nmen spending has a signi ican nega i e impac on economic g ow h in de el-
oping coun ies in he 20% o 50% and 70% quan iles. Go e nmen spending ha has a
signi ican nega i e impac on economic g ow h in de eloping coun ies in he 20% o 50%
and 70% quan iles can be caused by se e al ac o s. Fi s , ine iciency and co up ion in he
managemen o public spending o en e ode unds ha should be used o p oduc i e in-
es men . Second, his can be caused by inapp op ia e alloca ion o spending, o example,
mo e unds being alloca ed o consump i e spending han o in as uc u e o educa ion
in es men . Thi d, high deb bu dens o ce go e nmen s o di e unds om in es men
o deb in e es paymen s, he eby educing he po en ial o economic g ow h. Fou h,
poli ical ins abili y and inconsis en policies can c ea e unce ain y o in es o s, he eby
educing p i a e in es men and economic g ow h. Finally, weak ins i u ional quali y
and lack o anspa ency in public inancial managemen can educe he e ec i eness o
go e nmen spending in d i ing economic g ow h.
On he o he hand, a he 10%, 60%, 80%, and 90% quan iles, go e nmen spending
does no ha e a signi ican e ec on economic g ow h. This is due o se e al ac o s
including ine iciency and co up ion, inapp op ia e alloca ion, limi ed in as uc u e,
lack o skilled wo ke s, global economic condi ions ha a e expe iencing luc ua ing
commodi y p ices, and inapp op ia e go e nmen policies such as inapp op ia e subsidies
and an o e alloca ion o go e nmen employee sala y cos s. Fo example, in Indonesia in
2019, he o al s a e spending was IDR 2,461.1 illion, while he unds used o accele a e
Economies 2025,13, 113 21 o 31
in as uc u e de elopmen h ough c ea i e inancing we e only IDR 415 illion (Minis y
o Finance o he Republic o Indonesia,2020).
P e ious pe iod p i a e deb did no a ec he economic g ow h o de eloping coun-
ies in he 20% o 90% quan ile. This is due o se e al ac o s including he use o unds
o consump ion o asse specula ion, a limi ed in as uc u e and business en i onmen ,
a lack o access o ma ke s and echnology, he quali y o inancial ins i u ions, and eco-
nomic and poli ical ins abili y ha hampe in es men and g ow h, and inc ease he isk o
deb de aul .
The indings o he analysis a he 20% o 90% quan iles s eng hen he indings o
A cand e al. (2015), who ound ha he impac o p i a e deb on economic g ow h changed
om posi i e o nega i e when he a io o p i a e deb o GDP eached 100%. E idence o
he nega i e impac o p i a e deb on economic g ow h was also p esen ed by Cecche i
e al. (2011). Jo dàe al. (2016) p o ided e idence ha a s anda d de ia ions abo e he
mean, he in e ac ion o p i a e–public deb causes a dec ease in he cumula i e eal GDP
pe capi a g ow h o 5% in i e yea s.
Co up ion signi ican ly hampe s economic g ow h in de eloping coun ies in he 20%
o 80% quan ile. The e a e se e al ac o s ha cause high and massi e co up ion o ha e a
nega i e impac on economic g ow h, including dis o ion o esou ce alloca ion, dec eased
in es men , poli ical and social ins abili y, and weak go e nmen ins i u ions. Co up ion
causes ine icien esou ce alloca ion. Public unds ha should be used o in as uc u e
de elopmen , educa ion, and heal h a e di e ed o pe sonal o g oup in e es s. Co up-
ion c ea es an unce ain and non- anspa en in es men clima e. Co up ion igge s
public dissa is ac ion and poli ical ins abili y. Co up ion inc eases ansac ion cos s in
a ious economic sec o s in he o m o b ibes o ex o ion, which ul ima ely inc ease
he p ice o goods and se ices. Co up ion damages he in eg i y and e ec i eness o
go e nmen ins i u ions, he eby hampe ing e ec i e economic policies and c ea ing a
conduci e business en i onmen .
Co up ion inhibi s economic g ow h in he 20% o 80% quan iles, suppo ing he sand-
he-wheel heo y, which s a es ha co up ion can ha m he economy. The esul s o his
s udy suppo he indings o Egunjobi (2013), Ba dhan (1997), D idi (2013), Dzhumashe
(2014), Eh lich and Lui (1999), I ina e al. (2019), Mau o (1995,1998), Meon and Sekka
(2005), Mo (2001), and Shlei e and Vishny (1993) ha co up ion inhibi s economic g ow h.
Acco ding o Mau o (1995), co up ion inhibi s economic g ow h by educing in es men
le els. To elimina e he cul u e o co up ion, he mindse o s a e o icials, co po a ions,
and he people mus change.
Tax e enues ha e no signi ican impac on economic g ow h in de eloping coun ies
be ween he 10% and 90% quan iles. Se e al ac o s can cause ax e enues o ha e no
signi ican impac on economic g ow h, including low ax adminis a ion capaci y, a la ge
in o mal sec o , co up ion, poli ical and economic ins abili y, an undi e si ied economic
s uc u e, and ine ec i e ax policies. Weak adminis a i e capaci y, lack o ained pe -
sonnel, and inadequa e echnological in as uc u e can hinde he e ec i eness o ax
collec ion. In addi ion, he in o mal sec o o en domina es he economy o de eloping
coun ies, educing he ax e enue base. Co up ion educes ax e enues ha should go o
he s a e easu y. Many de eloping coun ies ely on ce ain sec o s, which a e ulne able
o global p ice luc ua ions. When commodi y p ices all, ax e enues om hese sec o s
also decline.
Poo ly designed ax policies can hinde economic g ow h. Tax a es ha a e oo high
o egula ions ha a e oo complex can bu den businesses and indi iduals. Un ai o
non- anspa en ax policies can educe ax compliance and c ea e public dissa is ac ion.
Da a om he Wo ld Bank o he pe iod 2021 o 2019 show ha he a io o ax e enue o
Economies 2025,13, 113 22 o 31
GDP in de eloping coun ies is only 14.8%. This ela i ely small ax a io means ha ax
e enue is unable o d i e economic g ow h. In addi ion, ax e enue is also used mo e o
ou ine ac i i ies and go e nmen ope a ions han o in es men .
The labo o ce pa icipa ion a e does no ha e a signi ican impac on economic
g ow h in de eloping coun ies in he 10% o 70% quan iles and he 90% quan ile. This is
due o se e al ac o s including low labo quali y, a dominan in o mal sec o , a lack o
decen jobs, a misma ch be ween skills and labo ma ke needs, s uc u al ba ie s, and
gende inequali y. The indings a hese quan iles con i m he indings o Cane e al.
(2021), who ound no signi ican ela ionship be ween he labo o ce pa icipa ion a e and
economic g ow h in OECD coun ies.
Ne o eign di ec in es men signi ican ly inc eases he economic g ow h o de elop-
ing coun ies in he 10% o 60% quan iles. Ne o eign di ec in es men can signi ican ly
inc ease economic g ow h in de eloping coun ies h ough se e al key ac o s including
echnology and knowledge ans e , job c ea ion, inc eased capi al in es men , inc eased
access o global ma ke s, inc eased ax e enues, and imp o ed in as uc u e.
This inding suppo s A bia and Sobhi’s (2024) s udy in No h A ican coun ies,
which ound ha ne o eign di ec in es men signi ican ly inc eases economic g ow h, es-
pecially when in e ac ing wi h ansmission channels. G ow h-based in es men s a egies
ou pe o m alue-based in es men s a egies, acco ding o a s udy by Monge e al. (2023).
The economic landscape in he egion is signi ican ly shaped by o eign di ec in es men
(Abo e al.,2018;Adegboye e al.,2020;A bia & Sobhi,2024;A bia e al.,2023;Asongu &
Odhiambo,2020;Hassan e al.,2011;Makdisi e al.,2002;Banday e al.,2021).
Howe e , ne o eign di ec in es men does no ha e a signi ican impac on economic
g ow h in de eloping coun ies in he 70% o 90% quan iles. This is due o se e al ac o s
including in es men quali y, c owding ou e ec s, he epa ia ion o p o i s by in es o s
o hei home coun ies, dependence on ce ain sec o s, weak abso p i e capaci y due o
lack o skilled labo , poo in as uc u e, weak ins i u ions, go e nance issues, and policy
misma ches. The e o e, i is impo an o de eloping coun ies o ha e he igh policies o
a ac quali y ne o eign di ec in es men and o ensu e ha such in es men p o ides
maximum bene i s o he local economy.
Based on WDI da a p ocessed by he au ho s in 2024, he ollowing combined g aph
shows he pa e n o how go e nmen deb and o he ac o s in luence economic g ow h.
Based on Figu e 1, i can be seen ha he pa e n o he e ec o ade ac o s on
economic g ow h is lowes a he 10% quan ile and highes a he 30% quan ile. Educa ion
expendi u e has he highes e ec pa e n a he 10% quan ile and he lowes a he 70%
quan ile. The in la ion a e has he lowes es ima e a he 10% quan ile and he highes
es ima e a he 90% quan ile. Go e nmen expendi u e has he lowes es ima e a he 10%
quan ile and he highes es ima e a he 90% quan ile. P i a e deb has he lowes es ima e
a he 50% quan ile and he highes es ima e a he 70% quan ile. The pa e n o go e nmen
deb e ec s has he lowes es ima e a he 70% quan ile and he highes es ima e a he
20% quan ile.
Based on Figu e 2, i can be seen ha he e ec o co up ion on economic g ow h
has he lowes es ima e a he 70% quan ile and he highes es ima e a he 10% quan ile.
The pa e n o ax e enue e ec s has he lowes es ima e a he 90% quan ile and he
highes es ima e a he 10% quan ile. Labo o ce pa icipa ion has he lowes es ima e
a he 30% quan ile and he highes es ima e a he 50% quan ile. The pa e n o o eign
in es men e ec s has he lowes es ima e a he 90% quan ile while he highes es ima e is
a he 10% quan ile. The cons an e ec on economic g ow h has he lowes es ima e a he
10% quan ile and he highes es ima e a he 90% quan ile.
Economies 2025,13, 113 23 o 31
Economies 2025, 13, x FOR PEER REVIEW 23 o 33
T ade Educa ion In la ion
Go e nmen expendi u e P i a e deb Public deb
Figu e 1. Effec pae n o ade, educa ion, infla ion, go e nmen expendi u e, p i a e deb , and
public deb on economic g ow h. No e: he uppe ed line is o p < 0.10, he blue line is o p < 0.05,
he lowe ed line is o p < 0.01.
Based on Figu e 2, i can be seen ha he effec o co up ion on economic g ow h has
he lowes es ima e a he 70% quan ile and he highes es ima e a he 10% quan ile. The
pae n o ax e enue effec s has he lowes es ima e a he 90% quan ile and he highes
es ima e a he 10% quan ile. Labo o ce pa icipa ion has he lowes es ima e a he 30%
quan ile and he highes es ima e a he 50% quan ile. The pae n o o eign in es men
effec s has he lowes es ima e a he 90% quan ile while he highes es ima e is a he 10%
quan ile. The cons an effec on economic g ow h has he lowes es ima e a he 10%
quan ile and he highes es ima e a he 90% quan ile.
Co up ion Tax Labo Fo ce Pa icipa ion
In es men Cons an
Figu e 2. The pae n o effec s o co up ion, ax, labo o ce pa icipa ion, in es men , and cons an
on economic g ow h. No e: he uppe ed line is o p < 0.10, he blue line is o p < 0.05, he lowe
ed line is o p < 0.01.
Figu e 1. E ec pa e n o ade, educa ion, in la ion, go e nmen expendi u e, p i a e deb , and
public deb on economic g ow h. No e: The uppe ed line cha is he 0.05 uppe limi e o , he blue
line cha is he p edic ed alue, while he lowe ed line cha is he 0.05 lowe limi e o .
Economies 2025, 13, x FOR PEER REVIEW 23 o 33
T ade Educa ion In la ion
Go e nmen expendi u e P i a e deb Public deb
Figu e 1. Effec pae n o ade, educa ion, infla ion, go e nmen expendi u e, p i a e deb , and
public deb on economic g ow h. No e: he uppe ed line is o p < 0.10, he blue line is o p < 0.05,
he lowe ed line is o p < 0.01.
Based on Figu e 2, i can be seen ha he effec o co up ion on economic g ow h has
he lowes es ima e a he 70% quan ile and he highes es ima e a he 10% quan ile. The
pae n o ax e enue effec s has he lowes es ima e a he 90% quan ile and he highes
es ima e a he 10% quan ile. Labo o ce pa icipa ion has he lowes es ima e a he 30%
quan ile and he highes es ima e a he 50% quan ile. The pae n o o eign in es men
effec s has he lowes es ima e a he 90% quan ile while he highes es ima e is a he 10%
quan ile. The cons an effec on economic g ow h has he lowes es ima e a he 10%
quan ile and he highes es ima e a he 90% quan ile.
Co up ion Tax Labo Fo ce Pa icipa ion
In es men Cons an
Figu e 2. The pae n o effec s o co up ion, ax, labo o ce pa icipa ion, in es men , and cons an
on economic g ow h. No e: he uppe ed line is o p < 0.10, he blue line is o p < 0.05, he lowe
ed line is o p < 0.01.
Figu e 2. The pa e n o e ec s o co up ion, ax, labo o ce pa icipa ion, in es men , and cons an
on economic g ow h. No e: The uppe ed line cha is he 0.05 uppe limi e o , he blue line cha is
he p edic ed alue, while he lowe ed line cha is he 0.05 lowe limi e o .
5. Conclusions
The deba e on he e ec o public deb on economic g ow h con inues among schol-
a s, wi h a ious s udies p oducing mixed conclusions. In an e o o p o ide a deepe
unde s anding, his s udy adop ed a quan ile eg ession app oach wi h ixed e ec s and
boo s apping, which allows o a mo e speci ic analysis o he impac o public deb on
economic g ow h in de eloping coun ies. In addi ion, his s udy also included co up ion
a iables o assess he impo an ole o e ec i e go e nance in d i ing economic g ow h.
Fu he mo e, his analysis also included o he ele an a iables, such as ade, educa ion
spending, in la ion a e, go e nmen spending, p i a e deb , axes, labo o ce pa icipa ion,
and ne o eign di ec in es men , o p o ide a mo e comp ehensi e pic u e o he ac o s
ha in luence economic g ow h in de eloping coun ies.
Economies 2025,13, 113 24 o 31
This s udy e ealed ha he bu den o public deb in he p e ious pe iod signi ican ly
hampe ed economic p og ess in de eloping coun ies, especially in he 30% o 90% quan ile
ange. The nega i e impac o public deb is no limi ed o g oups o coun ies wi h low
economic g ow h, bu also applies o mos de eloping coun ies. The p ac ical implica ion
is ha go e nmen s in de eloping coun ies need o adop iscal policies based on he
p inciple o p udence, including limi ing unp oduc i e loans and inc easing he e iciency
o public spending. T anspa en , accoun able, and sus ainable deb managemen mus
be a op p io i y. In addi ion, de eloping coun ies need o educe dependence on loans
as a sou ce o de elopmen inancing by s eng hening ax e enues, a ac ing p i a e
in es men , and de eloping mo e di e se economic sec o s. S eng hening ins i u ions is
also e y necessa y o ensu e mo e ocused and esponsible deb managemen .
T ade, he in la ion a e, go e nmen spending, p e ious pe iod p i a e deb , co -
up ion, labo o ce pa icipa ion, and ne o eign di ec in es men a e addi ional ac-
o s ha a ec he economic g ow h o de eloping coun ies. Meanwhile, educa ion
spending and ax e enues do no ha e a signi ican e ec on he economic g ow h o
de eloping coun ies.
The esul s o his s udy indica e ha ade has a signi ican impac on d i ing eco-
nomic g ow h in de eloping coun ies, especially in he 50% o 90% quan ile ange. How-
e e , in e es ingly, he impac was no seen in he 10% o 40% quan ile ange, indica ing ha
he bene i s o ade a e no e enly dis ibu ed ac oss he spec um o economic g ow h.
The e o e, go e nmen s o de eloping coun ies in he 50% o 90% quan ile ange need o
design ade policies ha a e speci ically aimed a imp o ing ma ke access, acili a ing
ade, and p omo ing expo s. In addi ion, i is impo an o de eloping coun ies o
di e si y hei expo ma ke s and p oduc s, he eby educing hei dependence on ce ain
ma ke s o p oduc s ha can be ulne able o global economic luc ua ions.
The inding ha educa ion expendi u e does no ha e a signi ican impac on all
spec ums o economic g ow h in de eloping coun ies has impo an p ac ical implica ions
o policymake s. I sugges s ha simply inc easing educa ion spending is no enough o
d i e economic g ow h. Go e nmen s need o ocus on imp o ing he quali y o educa ion,
ensu ing he ele ance o he cu iculum o he needs o he labo ma ke , and imp o ing
he go e nance and e iciency o he educa ion sys em. In es men s should be di ec ed
owa ds aining quali y eache s, p o iding adequa e in as uc u e, and de eloping
cu icula ha a e ele an o echnological and indus ial de elopmen s. In addi ion,
go e nmen s need o ensu e ha educa ion is equally accessible o all le els o socie y,
including ma ginalized g oups. S ong coo dina ion be ween he educa ion sec o and
indus y is also needed o ensu e ha g adua es ha e he skills needed by he labo ma ke .
Thus, educa ion spending can make a mo e signi ican con ibu ion o economic g ow h.
The inding ha in la ion a es ha e a signi ican nega i e impac on he economic
g ow h spec um o he 50% o 90% quan ile ange has e y impo an p ac ical implica ions
o de eloping coun ies. Coun ies in his spec um, which gene ally ha e a medium
le el o economic de elopmen , need o pay special a en ion o con olling in la ion o
main ain sus ainable economic g ow h. High in la ion can e ode people’s pu chasing
powe , educe in es men , and c ea e economic unce ain y. The e o e, go e nmen s and
cen al banks need o implemen app op ia e mone a y and iscal policies o main ain p ice
s abili y. This includes main aining app op ia e in e es a es, con olling he money supply,
and ensu ing iscal discipline. In addi ion, i is impo an o imp o e he e iciency o he
p oduc ion and dis ibu ion sec o s so ha he supply o goods and se ices emains s able.
Coo dina ion be ween a ious go e nmen agencies and he p i a e sec o is also needed
o add ess s uc u al ac o s ha can igge in la ion, such as supply chain p oblems and
Economies 2025,13, 113 31 o 31
Reinha , C. M., Reinha , V. R., & Rogo , K. S. (2012). Public deb o e hangs: Ad anced economy episodes since 1800. Jou nal o
Economic Pe spec i es,26, 69–86. [C ossRe ]
Reinha , C. M., & Rogo , K. S. (2010). G ow h in a ime o deb . Ame ican Economic Re iew,100(2), 573–578. [C ossRe ]
Sandow, J. N., O eng-Abayie, E. F., & Duodu, E. (2022). Ex e nal deb and economic g ow h in Sub-Saha an A ica: Does he e ogenei y
in he quali y o public sec o managemen make a di e ence? Heliyon,8, e10627. [C ossRe ]
Saungweme, T., & Odhiambo, N. M. (2019). Go e nmen deb , go e nmen deb se ice and economic g ow h nexus in Zambia:
A mul i a ia e analysis. Cogen Economics & Finance,7, 1622998.
Seo, M. H., & Shin, Y. (2016). Dynamic panels wi h h eshold e ec and endogenei y. Jou nal o Econome ics,195(2), 169–186. [C ossRe ]
Se en, L. (2007). Fiscal ules, public in es men , and g ow h. The Wo ld Bank, Policy Resea ch Wo king Pape s,4382, 1–33.
Shaa i, M. S., Masnan, F., Rani, M. J. A., Abidin, Z. Z., Ridzuan, A. R., & O hman, N. (2023). The g im cos o economic g ow h
and en i onmen al deg ada ion: A comp ehensi e panel ARDL s udy o public deb in he ASEAN-5 coun ies. Sus ainabili y,
15, 10756. [C ossRe ]
She a, S., & Kamaly, A. (2014). Does he budge de ici c owd-ou p i a e c edi om banking sec o ? The case o Egyp . Topics in
Middle Eas e n and A ican Economies,16(2), 251–279.
Shi u, W. O., Hassan, S., & Nawaz, M. A. (2018). The nexus be ween ex e nal deb , co up ion and economic g ow h: E idence om
i e SSA coun ies. A ican Jou nal o Economic and Managemen S udies,9, 319–334. [C ossRe ]
Shlei e , A., & Vishny, R. W. (1993). Co up ion. The Qua e ly Jou nal o Economics,108(3), 599–617. [C ossRe ]
Teles, V. K., & Mussolini, C. C. (2014). Public deb and he limi s o iscal policy o inc ease economic g ow h. Eu opean Economic Re iew,
66, 1–15. [C ossRe ]
Tempelman, J. H. (2007). James M. Buchanan on public-deb inance. The Independen Re iew,XI(3), 435–449.
Tsoul idis, L. (2007). Classical economis s and public deb . In e na ional o Re iew Economics,54, 1–12. [C ossRe ]
Woo, J. (2009). Why do mo e pola ized coun ies un mo e p ocyclical iscal policy? The Re iew o Economics and S a is ics,91(4), 850–870.
[C ossRe ]
Wu i, J. (2024). The ole o compa a i e ad an age in enhancing ade in alue-added using a dynamic GMM model. Economies,12, 187.
[C ossRe ]
Wu i, J., Widodo, T., & Ha di, A. S. (2022). Global alue chains pa icipa ion du ing he COVID-19 pandemic: A dynamic panel
app oach. Economies,10, 121. [C ossRe ]
Yaki a, A. (2008). Sus ainabili y o public deb , public capi al o ma ion, and endogenous g ow h in an o e lapping gene a ions se ing.
Jou nal o Public Economics,92(3–4), 897–914. [C ossRe ]
Yasa , N. (2021). The causal ela ionship be ween o eign deb and economic g ow h: E idence om commonweal h independen
s a es. Fo eign T ade Re iew,56(4), 415–429. [C ossRe ]
Yusu , A., & Mohd, S. (2021). The impac o go e nmen deb on economic g ow h in Nige ia. Cogen Economics & Finance,9, 1946249.
Disclaime /Publishe ’s No e: The s a emen s, opinions and da a con ained in all publica ions a e solely hose o he indi idual
au ho (s) and con ibu o (s) and no o MDPI and/o he edi o (s). MDPI and/o he edi o (s) disclaim esponsibili y o any inju y o
people o p ope y esul ing om any ideas, me hods, ins uc ions o p oduc s e e ed o in he con en .
