A Quantitative Study On The National Debt Scale’s Implications For Economic Growth

Keynesian economic takes the leading position in western countries after1929. It advocates that the governments should adopt deficit finance policy in promoting national economic growth. However, European debt crisis has caught the world’s attention since2009, and there is still no effective solutions. Serious debt crisis not only affects the economic development, and even cause the political unrest. Thus, this paper raised doubts about national debt’s effectiveness:what kind of impact that national debt takes to economic growth? How should we threat the effectiveness of the national debt? They are the main content of this thesis.This paper first collects and sorts a lot of literature, and finds out that there are three comments about the effectiveness of the national debt:negative effect theory, zero effect theory and positive effect theory. Keynesian economists claim the positive effect theory, but liberal economists and rational expectation school take the rest ones. According to the analysis of the previous scholars, this paper determines the research object-OECD countries sovereign debt, for the reasons of large data available and representative of the world economy.This dissertation analyzes the present situation of the OECD national debt and its economic growth in the initial stage of the quantitative study. OECD members have not an optimistic situation on national debt. Most of the countries’national debt index have being beyond the international safety margin. Meanwhile, we found that Japan, America, UK and other countries’debt scales are so huge that have been higher than the leading role of the European debt crisis (Greece, Portugal, etc.), but there is no crisis in these countries. The different point between them is that they have different emphasis during economic development:the former place extra emphasis on the real economy, and the latter focus on creating welfare. It shows that a country should pay attention to economic structure on the road of setting its economic development road. They had better focus on the development of the real economy, and improve its international economic competitiveness.Based on the study of the above, we apply panel data model to study the effectiveness of national debt. The results show that:firstly, what contributes most to economic growth is the labor, then is the capital; Secondly, public debt has no significant influence on economic growth, and no lag effect; Thirdly, in western countries, the type of political system has no significant influence on economic growth, but economic growth of Eurozone countries is lower than that of non-Eurozone countries. In addition, we study the national debt’s "cause effect" on capital growth, labor growth and r&d investment, and the conclusions are as follows: the national debt has a "cause effect" on capital growth, which doesn’t affect economics with the reason that economic growth depends so little on capital growth compared with labor growth; the national debt does not exist significant effect on the other two index.