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  • Thumbnail for CONTROVERSIAL AUSTERITY: DOES REDUCING THE DEFICIT ACTUALLY HELP GROWTH?
    CONTROVERSIAL AUSTERITY: DOES REDUCING THE DEFICIT ACTUALLY HELP GROWTH? by Pronove, Felix Ricardo

    There has been a significant examination of debt levels and their impact on economic growth. With the successful reduction of debt in Canada in the 1990s and Greece experiencing crippling debt levels in the 2010s, debt still plays a major role when nations enact financial policies. In this study, I examine the relationship between debt and economic growth by answering two questions; 1. Does high debt impact economic growth? 2. Does austerity really promote growth? By examining panel data from 34 OECD countries over 65 years, I find that high debt does, in fact, reduce economic growth. However, reducing the government deficit levels doesn’t result in larger growth. Overall, it seems that efforts to reduce debt levels will promote growth, but reducing deficit levels isn’t the best tool to do so.