Investigating the Relationship Between Budget Deficits and Economic Growth Using the System-Generalized Method of Moments (SYS-GMM)

governments worldwide are actively optimizing budget efficiency. This research aims to examine the relationship between government budget deficits and economic growth, emphasizing developed and developing countries, particularly the D8 group, during the period from 2010 to 2021, using the System Generalized Method of Moments (SYS-GMM). The results show that in developed and developing countries, especially the D8 group, the negative coefficient of the budget deficit on economic growth can be attributed to concerns such as the effect of congestion, high interest rates, or a decrease in trust in the economy due to financial imbalances and support for the neoclassical approach. In addition, there is an almost one-to-one positive effect between past economic growth and the current level of economic growth. However, this research helps to understand the sustainable impact of budget deficits on current economic conditions in developed and developing countries. Regarding the findings, policymakers should consider adopting contraptions that promote sustainable economic growth while exercising caution in budget deficit management.