Current Account Balance and Economic Growth: Interactions with Public Debt in Open Economics

Abstract

This conceptual article examines the interaction between current account balance, public debt, and economic growth within the context of open economies. While previous studies have widely explored the individual effects of public debt and external balances on growth performance, limited attention has been given to how these factors jointly shape long-term economic outcomes, particularly in economies with high trade openness and exposure to global financial conditions. This study develops an integrated conceptual framework that explains how current account positions influence the growth impact of public debt through multiple transmission channels, including external financing dependence, macroeconomic stability, fiscal space, and investor confidence. The article argues that persistent current account deficits may intensify the adverse growth effects of rising public debt by increasing vulnerability to capital flow volatility and external shocks, whereas sustained current account surpluses and strong external positions can reduce these risks and support more stable growth paths. By synthesizing insights from debt overhang theory, external sustainability frameworks, and open-economy macroeconomics, this paper contributes to a more comprehensive understanding of debt growth dynamics in globally integrated economies. The proposed conceptual model provides a foundation for future empirical research on the conditional effects of public debt on growth across different external balance regimes.