PUBLIC DEBT AND ECONOMIC GROWTH IN BRAZIL

Antonio Afonso, Sérgio Gadelha and Agatha Silva

No 2020/0148, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paperprovides new insights on the relationship between public debt and economic growth in Brazil. We used Granger causality tests, in multivariate and bivariate analyses using respectively VEC and ARDL methodologies, and monthly data over the period 1998:1-2019:11. We findthat: i) debt-to-GDP and GDP growth rate have a bi-directional Granger causality relationship; ii) debt can improve growth in the short run and becomesharmful in the long run; iii) GDP growth always reduces debt, both in the short and long run; iv) the dynamic between debt and growth in the long run is influenced by the inflation rate, exchange rate and the Emerging Markets Bond Index Plus(Embi+).

Keywords: Granger causality; Vector Autoregressive; Autoregressive Distributed Lag; government debt; economic growth; Brazil. (search for similar items in EconPapers)
JEL-codes: C22 C32 H63 H69 O40 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-fdg and nep-gro
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