Effectiveness of Public Debt as Economic Policy Tool

In this work I tried to investigate the relationship between public debt and economic growth. The data was taken for 10 countries over the period of 35 years. The main aim of this work is to find the correlation between economic growth and debt, or, to be more precise between annual GDP growth rate and debt to GDP ratio. The analysis above firstly takes into account all ten countries, and using panel data the conclusion was reached that debt to GDP ratio has a negative influence on growth. Then those countries was separated into two groups (5 countries in each group) to find out whether the negative relationship between debt and growth have some interconnections with the level of economies under consideration, so the groups was made ot of more developed and less developed countries. The results show the same influence for less developed countries (approximately -0.12% for each 1% increase in debt/GDP ratio) , while for more developed countries the link was not proved to be negative.