The Impact of Public Debt on Economic Growth in Palestine (2005-2019)

Abstract

This study aimed at examining the impact of public debt and domestic investment on economic growth in Palestine for the period 2005-2019. The study used multiple linear regression to examine the study hypotheses. The study  found diverse and, in some cases, inconsistent evidence on the relative impact of public debt on economic growth. The results show that there is a positive long-run relationship between public debt and economic growth. The study concluded that public debt is positively correlated with domestic investment. With the stability of other factors, the increase domestic investment is positive and strongly significant. In fact, a 1% variation of physical capital leads to an increase of 0.33% of economic growth in Palestine.  The effect of public debt on economic growth is also positive, may be for two reasons: either because the palestenian  public-debt-to-GDP ratio did not reach  a threshold beyond which public debt significantly lowers economic growth or because most of palestenian public debt is domestic debt.

Keywords: gross domestic product, economic growth, public debt, domestic investment, Palestine.

DOI: 10.7176/JESD/13-20-07

Publication date:October 31^st 2022