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Author: Juergen Attard
Publisher:
ISBN: 9783346095350
Category :
Languages : en
Pages : 58
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Master's Thesis from the year 2019 in the subject Economics - Economic Cycle and Growth, The University of York, course: MSc Economics, language: English, abstract: Despite the European sovereign debt crisis, few empirical studies have examined the debt and growth nexus for European economies, particularly on a holistic European level. This study sets out to address this gap by using data for 25 European Union member states to carry out a comprehensive analysis of the impact of debt on economic growth. A panel autoregressive distributed lag model (ARDL) is used to analyse the impact of debt on growth. This framework helps in determining both the long and short-run impact of debt on growth. This mitigates some limitations of previous empirical literature that explains either the short- or long-run effect. The full panel ARDL estimation illustrates a negative relationship between debt and growth both over the long and short-term. The debt and growth nexus, although of different magnitudes, is also negative across high and low levels of debt and across different time periods. Finally, a Dumitrescu Hurlin panel causality test is carried out to establish the causal direction between debt and growth. Evidence of bidirectional causality is detected for the full panel of countries. However, the direction of causality varies between countries with high and low average debt-to-GDP ratio. In the aftermath of the 2007 global financial and economic crisis, the level of global public debt has increased significantly. This upsurge in global public debt has led to the revival of the academic debate on public debt and economic growth nexus. With global debt levels well above those registered in 2008, it is vital to analyse the repercussions that government debt has on growth. Empirical research in this area is key to identify the policy recommendations needed to avoid another economic crisis.
Author: Juergen Attard
Publisher:
ISBN: 9783346095350
Category :
Languages : en
Pages : 58
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Book Description
Master's Thesis from the year 2019 in the subject Economics - Economic Cycle and Growth, The University of York, course: MSc Economics, language: English, abstract: Despite the European sovereign debt crisis, few empirical studies have examined the debt and growth nexus for European economies, particularly on a holistic European level. This study sets out to address this gap by using data for 25 European Union member states to carry out a comprehensive analysis of the impact of debt on economic growth. A panel autoregressive distributed lag model (ARDL) is used to analyse the impact of debt on growth. This framework helps in determining both the long and short-run impact of debt on growth. This mitigates some limitations of previous empirical literature that explains either the short- or long-run effect. The full panel ARDL estimation illustrates a negative relationship between debt and growth both over the long and short-term. The debt and growth nexus, although of different magnitudes, is also negative across high and low levels of debt and across different time periods. Finally, a Dumitrescu Hurlin panel causality test is carried out to establish the causal direction between debt and growth. Evidence of bidirectional causality is detected for the full panel of countries. However, the direction of causality varies between countries with high and low average debt-to-GDP ratio. In the aftermath of the 2007 global financial and economic crisis, the level of global public debt has increased significantly. This upsurge in global public debt has led to the revival of the academic debate on public debt and economic growth nexus. With global debt levels well above those registered in 2008, it is vital to analyse the repercussions that government debt has on growth. Empirical research in this area is key to identify the policy recommendations needed to avoid another economic crisis.
Author: Timo Mitze
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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In this paper, we study the long- and short-run relationship between regional public debt and economic performance for a sample of German federal states over the period of four decades (1970-2010). By choosing a sample of regional entities with comparable institutional settings, we complement the large literature on the debt-growth nexus based on heterogeneous cross-country samples. We estimate a dynamic error correction model that accounts for slope heterogeneity among cross-sections and the presence of unobserved common factors. While - in line with the Keynesian view - our findings hint at a non-linear inverted U-shape relationship between changes in the public debt intensity and economic growth in the short-run, we get strong statistical evidence for linear negative relationship between regional public depth and per capita GDP in the long-run. By means of a simple though experiment, we show that these negative longrun effects are not negligible for the size of interregional differences in per capita GDP levels and are in line with most international evidence on the detrimental growth effects of high public debt levels. Finally, these results also underline the need for effective fiscal rules at the federal state level in Germany.
Author: I Gede Yuddy Hendranata
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Andrea Filippo Presbitero
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper investigates the relationship between external debt and economic growth in poor countries. The adverse effects of external debt on economic performance are due to the crowding out of public investment and to the disincentive effects, because of debt overhang and uncertainty. Notwithstanding a general agreement on theory, empirical evidence is not conclusive and lacks of robustness. This contribution aims to shed more light on the relationship between external debt and economic growth and to draw some policy implication for debt relief. This work highlights the critical role of econometric and methodological issues. The results for a panel of 152 developing countries over the period 1977-2002 support a negative linear relationship between external debt and economic growth, and between debt service and investment. These effects are found to be stronger in the Low-Income Countries than in the overall sample, raising concern about the dramatic effect that debt has on economic performance in the world's poorest countries. In LICs, a debt reduction from a debt-to-exports ratio of 300 to the HIPC threshold of 150 is estimated to add more than one percentage point to per capita GDP growth, and a debt service reduction is found to be more than two times more effective than an equal increase in foreign aid. Eventually, external debt impairs economic growth through the liquidity constraint, the creation of macroeconomic instability, the lower efficiency of investment, and its effect on macroeconomic policies and institutional development.
Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
ISBN: 1484359623
Category : Business & Economics
Languages : en
Pages : 54
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This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Author: Jaejoon Woo
Publisher: International Monetary Fund
ISBN: 145520157X
Category : Business & Economics
Languages : en
Pages : 49
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This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Mr.Alexander Chudik
Publisher: International Monetary Fund
ISBN: 1513555901
Category : Business & Economics
Languages : en
Pages : 59
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This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with cross-sectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965- 2010 period, we find no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers in the long run.
Author: Marta Gómez Puig
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This paper uses panel data for 116 countries over the period 1995-2016 to investigate the heterogeneity of the debt-growth nexus across countries and the factors underlying it. In the first step, the grouped fixed effects (GFE) estimator proposed by Bonhomme and Manresa (2015) is used to classify countries into groups, with group membership being endogenously determined. In the second step, a multinomial logit model is used to explore the drivers of the heterogeneity detected, among them the quality of institutions, the composition of debt-funded public expenditure, the relative public and private indebtedness, and the maturity of debt. Finally, the underlying factors explaining the time-varying impact of public debt on growth in the country groups identified is also investigated.
Author: Andrea F. Presbitero
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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