The Impact of Government Debt on Aggregate Investment and Productivity in Developing Countries
Author: Muhammad Ziawar Shah

The current study highlights the empirical relationship between government debt with aggregate investment and Total Factor Productivity covering the period from 1980-2017 in developing countries of six different developing regions. The regions have been taken on the basis of Human Development Index ranking of United Nation Development Program. From the findings of the study we can see different regions have different responds both in Aggregate investment and Productivity in both 5 year FE and GMM. The impact of government debt on aggregate investment in using 5 year FE gives significant negative impact on aggregate investment in Arab, Europe, Central and South Asian regions while Latin America, Sub Sahara and East Asian economies there have been observed insignificant impact of government debt on aggregate investment. While in case of using GMM it’s been observed that there is significant negative impact of government debt on aggregate investment in East Asia, South Asia, Sub Saharan African and Latin American and Caribbean economies while the relationship between government debt and total factor productivity in case of using 5 year FE we can see that in Arab, East Asian, South Asia and Sub Saharan African regions the impact is negative and significant while in Europe and Latin America the impact is insignificant while using GMM the results indicate that increase in government debt will cause to reduce the total factor productivity in the respective regions. Therefore, we need to promote debt reduction policies to promote investment and productivity. Supervisor:- Dr. Attiya Yasmin Javid

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Keywords : Aggregate Investment, Developing Region, Government Debt, Productivity
Supervisor: Attiya Yasmin Javid

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