This paper aims is to empirically investigate the influence of macro–economic factors on the changes of the public debt in lower middle-income countries. By applying DGMM regression method on the dataset of 40 countries during the 1996-2015, the study provides empirical evidences on the role of macroeconomic factors on changes of public debt in lower middle-income countries, including trade openness, interest rates, budget surplus, inflation, economic growth, foreign direct investment, infrastructure, financial development. | VNU Journal of Science: Policy and Management Studies, Vol. 34, No. 3 (2018) 1-10 Determinants of Public Debt in Lower-Middle Income Countries Vu Duc Thuan* Cityview Property Investment & Trading Limited 12 Mac Dinh Chi, Dakao Ward, District 1, Ho Chi Minh City Nhận ngày 18 tháng 12 năm 2017 Chỉnh sửa ngày 09 tháng 6 năm 2018; Chấp nhận đăng ngày 04 tháng 9 năm 2018 Abstract: This paper aims is to empirically investigate the influence of macro–economic factors on the changes of the public debt in lower middle-income countries. By applying DGMM regression method on the dataset of 40 countries during the 1996-2015, the study provides empirical evidences on the role of macroeconomic factors on changes of public debt in lower middle-income countries, including trade openness, interest rates, budget surplus, inflation, economic growth, foreign direct investment, infrastructure, financial development. However, the unemployment rate does not have any impact whatsoever on debt to GDP ratios over the period. The study also implies that the policy-makers should give more emphasis on launching appropriate macro-economic policies. In particular, the government had better attract foreign direct investment, using of borrowing efficiently to enhance the rate of investment, increase earning and income as the most important sources to reduce public debt level. Keywords: Economics growth; Public debt; Differenced panel GMM Arellano-Bond estimation; Lower Middle Income Countries. JEL classifications: E62, F34, H62, H63. 1. Introduction sources finance for growth. Thus, the public debt dynamics has become as the primary issues for socio-economic development. The large-scale of public debt can have a negative impact on capital accumulation as well as labor productivity and economic growth [1]. Therefore, the challenge for policy makers is to obtain the dramatic economics growth with the debt sustainability. In recent years, there have been large amount of empirical .
