Dynamic interactions among public debt, governance, and sustainable development-insights from noble GMM-PVAR analysis

Kumar Debasis Dutta (), Mallika Saha () and Md. Mamun Sarder
Additional contact information
Kumar Debasis Dutta: Patuakhali Science and Technology University
Mallika Saha: Institute of Science and Technology of Sorocaba, São Paulo State University (UNESP)
Md. Mamun Sarder: Patuakhali Science and Technology University

Humanities and Social Sciences Communications, 2025, vol. 12, issue 1, 1-13

Abstract: Abstract Debt financing plays a crucial role in fostering economic development, particularly in developing countries. When strategic debt financing is directed toward policies that promote growth and reforms that enhance efficiency, it can serve as a catalyst for long-term sustainable development. However, excessive indebtedness could pose a significant challenge for emerging economies, potentially impeding their progress toward sustainability. This risk is particularly pronounced in contexts with weak governance, where elevated public debt levels may erode developmental gains and obstruct the transition to sustainable development. Given these complex dynamics, this study investigates the interplay between public debt, governance, and sustainable development in 35 developing countries. The analysis employs the Generalized Method of Moments-Panel Vector Autoregression (GMM-PVAR) as it captures the unobserved heterogeneity and time-invariant observation by employing fixed effects, examining endogenous interactions, dynamic links and possible direction of causality among variables, when the theoretical links among variables are not adequately defined. Additionally, to capture the long-term structural relationships and help understand the dynamics further, the System Generalized Method of Moments (SGMM) models are also used. The findings reveal a nonlinear relationship between public debt and sustainable development. Up to a certain threshold, specifically 27.5% of GDP, public debt contributes to the advancement of emerging economies toward sustainable development. However, beyond this threshold, the positive impact rapidly becomes detrimental as debt levels continue to rise. In contrast, strong governance consistently promotes and sustains sustainable development. These results hold significant implications for policymakers, offering guidance on managing public debt to support long-term sustainability goals.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41599-025-05742-7 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palcom:v:12:y:2025:i:1:d:10.1057_s41599-025-05742-7

Ordering information: This journal article can be ordered from
https://www.nature.com/palcomms/about

DOI: 10.1057/s41599-025-05742-7

Access Statistics for this article

More articles in Humanities and Social Sciences Communications from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().