Public debt and economic growth
Research group: Macroeconomy and public finances Research began: 2021 Research ends: 2021 Sponsored by: Economic Policy Council

Responsible for research:

Public debt and economic growth

Public debt and economic growth

Recent statistics on both explicit and hidden government debt in Finland and other EU countries give cause for taking the issue of high levels of public debt raise seriously. The topic is particularly relevant for Finland today as the EU’s fiscal rules will soon be revisited and Finland will have to take an official stand on the level of government debt ratio that all EU countries will have to attain.

The purpose of this research project is to find out

  • what economic research has to say about high public debt-to-GDP ratio and economic growth,
  • through which channels the adverse effects occur, and
  • whether these are relevant for Finland in the 2020s.

A thorough understanding of the economic literature and of the mechanism through which public debt my adversely affect growth is needed to formulate plausible policy recommendations. The background report consists of a review of recent literature.

Responsible for research: