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dc.contributor.authorMaithreerathna, R.D. Asanka
dc.contributor.authorMummullage, P. Chamika
dc.contributor.authorNaranpanawa, Athula
dc.contributor.authorGunasinghe, Chandika
dc.contributor.editorRohde, Nicholas
dc.contributor.editorNaranpanawa, Athula
dc.date.accessioned2020-01-16T07:44:38Z
dc.date.available2020-01-16T07:44:38Z
dc.date.issued2019
dc.identifier.issn1837-7750
dc.identifier.otherRePEc:gri:epaper:economics:201903
dc.identifier.urihttp://hdl.handle.net/10072/390497
dc.description.abstractPublic debt is one of the key fiscal policy variables that can be influence the economic growth of any country. For this reason, policymakers and economists have worried about the relationship between debt and growth. Empirical studies of the relationship between debt and growth have, however, been recently contested because of their mixed results; negative vs positive and linear vs non-linear. Moreover, some researchers have found a non-linear relationship. There are several main theoretical perspectives which underpin this relationship between debt and growth. In the Keynesian view, debt and growth are positively related. However, Monetarist economists argue debt and growth have a negative relationship. Sri Lanka has accumulated a large amount of debt over the past six decades from both domestic sources and external sources. Accordingly, the main objective of this study is to assess the impact of public debt on economic growth in Sri Lanka using time series data from 1960 to 2016. Other specific objectives are to identify the relationship between total domestic debt and external debt on economic growth and to identify significant policy implications and make suggestions to enhance economic growth. Thus, this study involves two analysis stages. The first one is an aggregate analysis, which assesses the impact of total debt on economic growth. The second one is a disaggregate analysis, which assesses the impact of domestic debt and external debt on economic growth separately. This study implements the Structural Vector Auto Regression (SVAR) approach to examine the impact of public debt on GDP growth in a short-term as well as medium-term in Sri Lanka. This study confirms that total debt has a negative impact on GDP growth in Sri Lanka. In addition, based on the disaggregate analysis, we can conclude that domestic debt has a negative and significant linear relationship with GDP growth in Sri Lanka and external debt has a positive but insignificant relationship with GDP growth in Sri Lanka. Moreover, this study shows that debt service has a negative but insignificant impact on GDP growth in Sri Lanka. Policymakers should consider alternative strategies to fill resource gaps, such as the budget deficit and saving-investment gap, without borrowing from domestic or external sources. Thus, the country should promote public private partnerships (PPPs) and foreign direct investment (FDI) instead of loans. For this reason, the necessary legal framework and infrastructure facilities need to be improved to attract more foreign and other private investors to promote economic growth in Sri Lanka.
dc.format.extent30 pages
dc.languageEnglish
dc.publisherGriffith University
dc.publisher.placeBrisbane, Australia
dc.relation.ispartofpagefrom1
dc.relation.ispartofpageto30
dc.subject.keywordsC32 - Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
dc.subject.keywordsO40 - Economic Growth and Aggregate Productivity: General
dc.subject.keywordsC54 - Quantitative Policy Modeling
dc.subject.keywordsF34 - International Lending and Debt Problems
dc.subject.keywordsPublic debt
dc.subject.keywordsDomestic debt
dc.subject.keywordsExternal debt
dc.subject.keywordsEconomic growth
dc.subject.keywordsSri Lanka
dc.title2019-03: An Empirical Analysis of the Impact of Total Debt on the Economic Growth of Sri Lanka (Working paper)
dc.typeReport
dc.type.descriptionDiscussion Paper
gro.facultyGriffith Business School
gro.description.notepublicEconomics and Business Statistics
gro.rights.copyrightCopyright © 2010 by author(s). No part of this paper may be reproduced in any form, or stored in a retrieval system, without prior permission of the author(s).
gro.date.issued2019
gro.hasfulltextFull Text
gro.griffith.authorNaranpanawa, Athula
gro.griffith.authorGunasinghe, Chandika I.


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