Empirical Economic Bulletin, An Undergraduate Journal


The study aims to find the relationship in between economic growth and public debt in the United Kingdom using a Vectoral Autoregression approach in between 1999 till 2017. The study aims to examine the impact of public debt on interest rates, inflation rates, Real GDP growth rate, and interest debt payments in the UK. The results show a positive and statistically significant impact of public debt on inflation rates and interest rates. It is also found that the variables affect each other as a consequence in the model and therefore public debt also influence the real GDP growth rates and interest debt payments indirectly. The study also suggests that public debt is good only until it is in sustainable levels and used in an efficient manner. Public debt is only analyzed in the short term and is confirmed to create significant economic boost through a fiscal stimulus which cannot be sustained as time passes and the dollar amounts of public debt reach higher.