—This paper examines the impact of federal
government’s debt on the level of economic growth particularly
in Malaysia. By using quarterly data from the first quarter of
2000 until the fourth quarter of 2011, it was found that high
domestic debt does have negative impact on the level of
economic growth in the long-run. However, the level of external
debt has no significant influence in changing the economic
growth within the same time frame. From the short-run
perspective, both domestic and external debts have no
significant impact on the level of economic growth.
Nevertheless, if there is any shock in the current economic
condition, the real GDP is able to restore its equilibrium level in
—Budget Deficit, Domestic Debt, External Debt,
Federal Government’s Debt.
The author is with the Universiti Teknologi MARA (Terengganu),
Dungun, 23000 Terengganu (e-mail: email@example.com).
Cite:Nur Hayati Abd Rahman, "How Federal Government’s Debt Affect the Level of Economic Growth?," International Journal of Trade, Economics and Finance vol.3, no.4, pp. 323-326, 2012.