Determinants of the public debt and the role of the natural resources : a cross-country analysis

This paper investigates the major drivers of the public debt growth in 184 countries. Our analysis consists in a cross-country survey, which is conducted on the basis of the improved compilation of datasets on the central government debt for 2013. In order to differentiate between developing/transition and advanced countries, we generate dummy variables for the different country groups. Following existing literature, we employ military expenditure as a share of GNP, as a proxy of existent or potential conflict, induced driver of the public expenditure. The study finds that oil abundance, economic growth rate, the share of mineral rent in the total revenue, interest rate payments for foreign borrowings, and developing country dummy have statistically significant impact on the growth of the public debt. In contrast, defense spending, unemployment rate, and inflation rate do not have a statistically significant positive impact on the public debt rate.