The Impact of Government Debt on the Economic Growth of Bhutan
The study aims to empirically examine the relationship between the government debt and economic growth in Bhutan. The study was motivated by the unprecedented increase in the level of government debt currently prevailing in Bhutan. To determine the relationship the data were obtained from World Economic Outlook (IMF), World Bank and National statistics Bureau of Bhutan. Time series data from the period 1990 to 2016 were fitted into the regression equation using various economic techniques. The result of Augmented Dicky Fuller (ADF) and Phillips Perron (PP) unit root test suggest that all the variables are non-stationary at level but exhibit stationary after the first difference. The Johansen co-integration test and Vector Error Correction Model (VECM) is employed to investigate the effect of debt on real gross domestic product growth.
Index Terms - Government Debt, Economic Growth, Co-Integration Test, Vector Error Correction Model.