scholarly journals Public Debt and Economic Growth: Further Evidence for the Euro Area

2017 ◽  
Author(s):  
Marta GGmez-Puig ◽  
Simmn Sosvilla Rivero
Keyword(s):  
Economic Growth ◽  
Euro Area ◽  
Public Debt

Public debt and growth in the euro area: evidence from parametric and nonparametric Granger causality

2015 ◽  
Vol 15 (2) ◽  
Author(s):  
Silvestro Di Sanzo ◽  
Mariano Bella
Keyword(s):  
Economic Growth ◽  
The Netherlands ◽  
Granger Causality ◽  
Euro Area ◽  
Public Debt ◽  
Empirical Literature ◽  
Gdp Growth ◽  
Empirical Results ◽  
Causality Tests ◽  
Granger Causality Tests

AbstractMany studies in the empirical literature show that public debt is negatively correlated with economic growth but there is no paper that studies the causal links between these variables using rigorous tests based on Granger’s ideas. Accordingly, we investigate the causal links between debt-to-GDP ratio and economic growth using both linear parametric and nonlinear nonparametric Granger causality tests. We focus on 12 euro countries for the period 1970–2012. Our empirical results suggest a unidirectional causality running from debt to economic growth for Spain and Portugal and a bidirectional causality for Belgium, Germany, Greece, Ireland and Italy. No causality in either direction is identified for Austria, Finland, Luxembourg and the Netherlands. Finally, for France, the tests provide evidence for a unidirectional causality running from GDP growth to debt-to-GDP ratio. In addition, the nonlinear tests indicate that overlooking nonlinearities may result in misleading conclusions about Granger causality. Caveats of the analysis, as well as policy conclusions, are also discussed.

scholarly journals PUBLIC DEBT AND ECONOMIC GROWTH IN EURO AREA COUNTRIES. A WAVELET APPROACH

2021 ◽  
Vol 0 (0) ◽  
pp. 1-24
Author(s):  
Ada-Cristina Albu ◽  
Lucian-Liviu Albu
Keyword(s):  
Economic Growth ◽  
Euro Area ◽  
Public Debt ◽  
Fiscal Sustainability ◽  
Short Term ◽  
Member States ◽  
Time Frequency ◽  
Euro Zone ◽  
Economic Output

In this paper we propose to analyze the dynamic of the relation between public debt and economic growth rate for Euro area countries by employing a wavelet approach, establishing thus both short-term and long-term correlations between these two variables. In this way we will present time-frequency dependencies between debt and economic growth and differentiate between short term and long-term effects. High levels of public debt have a negative impact on the economic output, because they entail concerns about debt sustainability. Non-linear analysis of the debt-growth nexus shows the existence of thresholds from which rising indebtedness can hamper economic growth. Using wavelet analysis, we demonstrate that there is a strong relation between public debt and economic growth, especially for high frequencies, public debt having a significant impact on economic growth in case of periods situated above 2 years for most Euro Zone member states. High debt levels can cause serious effects on fiscal stability and therefore require fiscal consolidation in order to restore economic growth. Therefore, Euro Zone member states should implement prudent debt policies and establish clear limits for debt increase, in order to comply with fiscal sustainability and ensure conditions for preserving economic growth.

scholarly journals Public debt and economic growth: Further evidence for the euro area

2018 ◽  
Vol 68 (2) ◽  
pp. 209-229 ◽  
Author(s):  
Marta Gómez-Puig ◽  
Simón Sosvilla-Rivero
Keyword(s):  
Economic Growth ◽  
Euro Area ◽  
Public Debt ◽  
Negative Impact ◽  
Annual Data ◽  
Bounds Testing ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run

This paper empirically investigates the short and the long run impact of public debt on economic growth. We use annual data from both the central and the peripheral countries of the euro area (EA) for the 1961–2013 period and estimate a production function augmented with a debt stock term by applying the Autoregressive Distributed Lag (ARDL) bounds testing approach. Our results suggest different patterns across the EA countries and tend to support the view that public debt always has a negative impact on the long-run performance of EA member states, whilst its short-run effect may be positive depending on the country.

scholarly journals Public Debt and Economic Growth Nexus in the Euro Area: A Dynamic Panel ARDL Approach

2020 ◽  
Vol 67 (3) ◽  
pp. 291-31ö
Author(s):  
Themba Gilbert Chirwa ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Euro Area ◽  
Public Debt ◽  
Negatively Associated ◽  
Panel Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Study Results ◽  
Short Run ◽  
The Relationship

This study investigates the relationship between public debt and economic growth using panel data from 10 European Countries. Using a panel ARDL approach, the results show that public debt, government consumption, and the real exchange rate are negatively associated with economic growth both in the short- and long-run. Furthermore, investment and the real interest rate were found to be positively associated with economic growth both in the short- and long-run. Inflation and trade openness were found to have mixed results: both were negatively associated with economic growth in the long run while in the short run the relationship was positive and consistent across groups with a few exceptions. Second, the study results also showed that debt is nonlinear at the 70% threshold only in the long-run while in the short run the results were consistently negative and across groups. The study results have significant policy implications for the Stability and Growth Pact of the Euro area. It is recommended that member states should ensure fiscal sustainability by balancing their fiscal budgets to effectively reduce the accumulation of public debt as well as implementing structural reforms that will improve the efficiency of investment as well as macroeconomic stability.

How Does Public Debt Affect the Indian Macroeconomy? A Structural VAR Approach

2020 ◽  
Vol 14 (3) ◽  
pp. 253-284
Author(s):  
Ranjan Kumar Mohanty ◽  
Sidheswar Panda
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Public Debt ◽  
Positive Impact ◽  
Decomposition Analysis ◽  
Structural Var ◽  
Adverse Impact ◽  
Mixed Effect ◽  
Domestic Debt ◽  
The Impact

The study investigates the macroeconomic effects of public debt in India during 1980–2017 using a structural vector autoregression framework. The objective is to examine the impact of public debt on the interest rate, investment, inflation and economic growth in India. The results of the impulse response functions show that public debt has an adverse impact on economic growth but a positive impact on the long-term interest rate in the short run and a mixed effect (both negative and positive) on investment and inflation. We also find that domestic debt has a more adverse impact on the economy than external debt. The estimated variance decomposition analysis finds that much of the variation in selected macro variables are explained by public debt and growth in India. This study suggests that public debt especially domestic debt should be controlled and channelled productively to have a favourable impact on the economy. JEL Classification: H63, O40, C40

scholarly journals Public debt and economic growth: Is there a causal effect?

2014 ◽  
Vol 41 ◽  
pp. 21-41 ◽  
Author(s):  
Ugo Panizza ◽  
Andrea F. Presbitero
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Causal Effect
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