Growth and Productivity: The Role of Government Debt
Technical University of Lisbon Department of Economics Working Paper No. 13/2011/DE/UECE
43 Pages Posted: 24 Jul 2011
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Growth and Productivity: The Role of Government Debt
Growth and Productivity: The Role of Government Debt
Date Written: July 23, 2011
Abstract
We use a panel of 155 countries to assess the links between growth, productivity and government debt. Via growth equations we assess simultaneity, endogeneity, cross-section dependence, nonlinearities, and threshold effects. We find a negative effect of the debt ratio. For the OECD, the higher the debt maturity the higher economic growth; financial crisis are detrimental for growth; fiscal consolidation promotes growth; and higher debt ratios are beneficial to TFP growth. The growth impact of a 10% increase in the debt ratio is -0.2% (0.1%) respectively for countries with debt ratios above (below) 90% (30%), and an endogenous debt ratio threshold of 59% can be derived.
Keywords: government debt, crises, panel analysis
JEL Classification: C23, E62, H50
Suggested Citation: Suggested Citation
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