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Public debt service and economic growth: a survey of International literature

This paper provides a comprehensive survey of the analytical arguments and empirical evidence on the impact of public debt service on economic growth, in both developing and developed countries. Although most of the literature reviewed supports the classical view that public debt service negatively affects economic growth, a few other empirical findings revealed that the link between these two macroeconomic variables is non-existent. On the whole, the paper concludes that the impact of public debt service on economic growth is dependent on the size, structure and composition of both domestic and foreign public debt. Therefore, in a wider macroeconomic setting for public policy, governments are encouraged to ensure that both the level and rate of public debt growth is primarily sustainable, and can be serviced in a manner which lessens economic, political and social costs.