The Impact of Public Debt on Economic Growth of Pakistan

Abstract

This study is an attempt to explore the impact of public debt on economic growth of Pakistan. To explore the relationship the study used augmented Solow growth Model. To test the model, Bound test for Cointegration is applied on time series data that cover the period from 1972 to 2013. The empirical results of the study suggest that public debt and economic growth has positive but statistically insignificant relationship. In addition, our control variables i.e., population growth  enter in the model with expected negative sign while human capital and private investment bear their expected positive signs and are also statistically significant. This indicates that human capital and private investment play a vital role in the growth and development of an economy.