The Impact of Government Debt on Macroeconomic Indicators: Evidence from G7 and ASEAN Countries

Government debt continues to be a critical economic policy issue, which largely affects both developed and developing countries, due to elevated level of debt. From a general viewpoint, government debt is a crucial feature of a country\u27s financial system and a major indicator that contributes to the formation of a country\u27s reputation in the international market. This paper investigates the impact of government debt on certain macroeconomic and wellbeing indicators in a group of industrialized and developing countries. That is, the study seeks to examine how government debt influences GDP per capita, domestic and foreign investment, and HDI in both G7 and ASEAN nations during the period from 1995 to 2015. While the results indicate that there is a positive relationship between government debt and macroeconomic indicators in G7 countries, the government debt of ASEAN countries has a negative impact on macroeconomic and wellbeing indicators. Some presumed causes of the different impact of the debt on G7 vs ASEAN economies is allocation effect , threshold effect , and institutional quality effect