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JOURNAL OF APPLIED BUSINESS AND ECONOMICS

Determinants of GDP Growth and the Impact of Austerity

Author(s): Arvind Jadhav, James P. Neelankavil, David Andrews

Citation: Arvind Jadhav, James P. Neelankavil, David Andrews, (2013) "Determinants of GDP Growth and the Impact of Austerity," Journal of Applied Business and Economics, Vol. 15, Iss. 1, pp. 15-28

Article Type: Research paper

Publisher: North American Business Press

Abstract:

Most industrialized countries are facing slower growth rates, higher unemployment levels, and

unnamable national debt as a percentage of GDP and consequently incurring a high cost of servicing this

debt. Among the various solutions suggested to reduce the debt burden is to undertake austerity measures

to improve fiscal balance and, hence, potentially reduce debt. Growth and austerity programs appear to

be inversely related during periods of downturn and slow economic recovery. It has been shown that

during a period of sustained upswing, both objectives are positively correlated as higher growth enables

higher austerity. To date, studies that have attempted to suggest the feasibility of attaining growth

through various programs including austerity during rising national debt have not conclusively shown

that this is an attainable objective for policy makers. In this paper we attempt to show that there are

initiatives that government’s can implement given the right timing and well-planned initiatives could offer

a reasonably successful solution.