Public Debt and Economic Growth Nexus in the Euro Area: A Dynamic Panel ARDL Approach
Themba Chirwa and
Nicholas Odhiambo
Scientific Annals of Economics and Business (continues Analele Stiintifice), 2020, vol. 67, issue 3, 291 - 310
Abstract:
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. JEL Codes - C23, F34, F43, H63, N14
Keywords: Euro Area; Panel ARDL Models; Cointegration; Public Debt; Economic Growth (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1184 (application/pdf)
Related works:
Working Paper: Public debt and economic growth nexus in the euro area: A dynamic panel ARDL approach (2020) 
Working Paper: Public debt and economic growth nexus in the Euro area: A dynamic panel ARDL approach (2017) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:67:y:2020:i:3:p:291-310:n:170
Access Statistics for this article
More articles in Scientific Annals of Economics and Business (continues Analele Stiintifice) from Alexandru Ioan Cuza University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Sireteanu Napoleon-Alexandru ().