Public Debt and Stability in Economic Growth: Evidence for Latin America

Jos Mauricio Gil Le N, John William Rosso Murillo and Edgar Alonso Ramirez Hern Ndez
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Jos Mauricio Gil Le N: Department of Economic, Universidad Pedag gica y Tecnol gica de Colombia, Tunja, Colombia
John William Rosso Murillo: Department of Business Administration, Universidad Pedag gica y Tecnol gica de Colombia, Tunja, Colombia,
Edgar Alonso Ramirez Hern Ndez: Departament of Economic, Universidad de Los Andes, Bogot , Colombia
Authors registered in the RePEc Author Service: José Mauricio Gil León ()

International Journal of Economics and Financial Issues, 2019, vol. 9, issue 4, 137-147

Abstract: We study the effect of public indebtedness on economic growth in Latin American economies. Our main findings indicate that a Public Debt-GDP ratio of 75% leads to a deceleration in growth. On the other hand, a ratio of 35% increases the growth volatility. By using a Panel VAR we also found that external shocks, such as the foreign capital flows and the terms of trade, influence in the public debt effect on the economic growth. Clearly, the higher the level of public debt, the more vulnerable the economy can be in the short term; however, in the long term the growth is relevant for fiscal sustainability.

Keywords: public debt; economic growth; GDP volatility; macroeconomic stability; current account. (search for similar items in EconPapers)
JEL-codes: E60 E62 H63 O47 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2019-04-16

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