On the relation between public debt and economic growth: an empirical investigation

Autores/as

  • Bettina Fincke Bielefeld University
  • Alfred Greiner Bielefeld University

DOI:

https://doi.org/10.17811/ebl.4.4.2015.137-150

Resumen

In this paper we empirically study the relation between public debt and economic growth. We analyze how the public debt to GDP ratio at a certain point in time is correlated with the GDP growth rate in the following period, where we consider a one-year time span, a three-years time interval and a five-years interval. Using panel data comprising seven developed countries from 1970-2012, we estimate a pooled regression model and a random effects model. We find strong evidence for a significantly negative relation between debt and growth. Further, for most specifications this relationship does not seem to be characterized by non-linearities.

Citas

Data Sources

IMF (2013): “International Financial Statistics,” via StatistikNetz.de, DSI Data Service and Information.

OECD Databases (2013): “Economic Outlook Statistics and Projections” also “Fiscal Positions and Business Cylcles (historical ed.),” via StatistikNetz.de, DSI Data Service and Information.

References

Ballasone, F., M. Francese and A. Pace (2011) “Public Debt and Economic Growth in Italy.” Quaderni di Storia Economica / Economic History Working Papers, n. 11, October 2011, Banca d’Italia, Rome.

Caner, M. T. Grennes and F. Koehler-Geib (2010) “Finding the tipping point - When sovereign debt turns bad.” The World Bank, Policy Research Working Paper 5391.

Checherita, C. and P. Rother (2010) “The impact of high and growing debt on economic growth. An empirical investigation for the euro area.” ECB working paper series num- ber 1237.

Checherita-Westphal, C., A.H. Hallett and P. Rother (2012) “Fiscal sustainability using growth- maximising debt targets.” ECB working paper series number 1472.

Croissant, Y. and G. Millo (2008) “Panel Data Econometrics in R: The plm Package”, Journal of Statistical Software Volume 27 (2) http://www.jstatsoft.org/

Dreger, C. and H.-E. Reimers (2013) “Does Euro Area Membership Affect the Relation be- tween GDP Growth and Public Debt?” Journal of Macroeconomics, available online 22 August 2013 and DIW Discussion Paper 1249, 2012.

Egert, B. (2012) “Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality?”

OECD Economics Department Working Papers 993, OECD Publishing.

Ferreira, C. (2009) “Public Debt and Economic Growth: a Granger Causality Panel Data Ap- proach.” School of Economics and Management, Technical University of Lisbon, working paper 24/2009.

Fox, C., S. Weisberg, D. Adler, D. Bates, G. Baud-Bovy, S. Ellison, D. Firth, M. Friendly,

G. Gorjanc, S. Graves, R. Heiberger, R. Laboissiere, G. Monette, D. Murdoch, H. Nils- son, D. Ogle, B. Ripley, W. Venables, and A. Zeileis, R-Core (2013) “Package car”, http://cran.r-project.org/web/packages/car/car.pdf, last access on Novem- ber 6th, 2013.

Greiner, A. (2009) “Estimating penalized spline regressions: theory and application to eco- nomics” Applied Economics Letters, Vo. 16 (18): 1831-1835.

Greiner, A. (2013) “Debt and growth: Is there a non-monotonic relation?” Economics Bulletin,

Vol. 33: 340-47.

Kauermann, G. (2006) “Nonparametric models and their estimation” Allgemeines Statistisches Archiv, Vol. 90 (1): 137-152.

Kleiber, C., and A. Zeileis (2008) Applied Econometrics with R. Use R! Springer, New York.

Kumar, M.S. and J. Woo (2010) “Public debt and growth.” IMF working paper number WP/10/174.

Panizza, U. and A.F. Presbitero (2013) “Public debt and economic growth in advanced economies: A Survey”, Swiss Journal of Economics and Statistics, Vol. 149, No. 2, pp. 175-204.

Reinhart, C.M. and K.S. Rogoff (2010) “Growth in a time of debt.” NBER working paper num- ber 15639.

Smyth, D.J. and Y. Hsing (1995) “In search of an optimal debt ratio for economic growth.”

Contemporary Economic Policy, Vol. 13: 51-59.

Descargas

Publicado

2015-07-09

Cómo citar

Fincke, B., & Greiner, A. (2015). On the relation between public debt and economic growth: an empirical investigation. Economics and Business Letters, 4(4), 137–150. https://doi.org/10.17811/ebl.4.4.2015.137-150

Número

Vol. 4 Núm. 4 (2015): December - Special Issue Debt and Sustainability

Sección

Special Section

Licencia

The works published in this journal are subject to the following terms:

1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.

© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press

2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.

3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of  the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.