| Summary/Abstract |
This article seeks to determine the effect of the amount of public debt on the long-run economic growth of the Israeli economy, using data from the years 1983–2013. The accepted economic perspective is that the influence of public debt on the economy depends on the ratio of the size of the debt to GDP. This article will also measure the influence of the size of public debt in accordance with this ratio, with the implication being that the larger the debt, the larger the ratio of debt to GDP. It will indicate that the relationship between the ratio of public debt to GDP and economic growth appears graphically as an inverted U shape. Such a relationship implies that for relatively low levels of debt to GDP ratio there is a positive effect on growth and only at higher levels of this ratio does the marginal effect become negative. The article was not able to locate the exact inflection point at which the influence becomes negative, but it can be determined that this point lies within the range of a debt to GDP ratio of 130% and greater. These results are contrary to other results which have shown that the negative influence begins at a ratio of 90%.
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