Public Debt and Economic Growth: Further Evidence for the Euro Area

Marta Gómez-Puig () and Simon Sosvilla-Rivero

Acta Oeconomica, 2018, vol. 68, issue 2, 209-229

Abstract: This paper empirically investigates the short and the long run impact of public debt on economic growth. We use annual data from both the central and the peripheral countries of the euro area (EA) for the 1961–2013 period and estimate a production function augmented with a debt stock term by applying the Autoregressive Distributed Lag (ARDL) bounds testing approach. Our results suggest different patterns across the EA countries and tend to support the view that public debt always has a negative impact on the long-run performance of EA member states, whilst its short-run effect may be positive depending on the country.

Keywords: public debt; economic growth; bounds testing; euro area; peripheral euro area countries; central euro area countries (search for similar items in EconPapers)
JEL-codes: C22 F33 H63 O40 O52 (search for similar items in EconPapers)
Date: 2018
Note: This paper is based upon our work supported by the Instituto de Estudios Fiscales (Grant no. IEF 101/2014 and IEF 015/2017), the Banco de España (Grant no. PR71/15-20229), the Spanish Ministry of Education, Culture and Sport (Grant no. PRX16/00261) and the Spanish Ministry of Economy and Competitiveness (Grant no. ECO2016-76203-C2-2-P). Simón Sosvilla-Rivero thanks the members of the Department of Economics at the University of Bath for their hospitality during his research visit. Responsibility for any remaining errors rests with the authors.
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Related works:
Working Paper: Public debt and economic growth: Further evidence for the euro area (2017)
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