 Public debt and r-g risks in advanced economies: Eurozone versus stand-aloneJournal of International Money and Finance, 2023, vol. 136, issue C Abstract: Differentials between interest rates on government bonds (r) and economic growth rates (g) are a key determinant of public debt dynamics. What are the predictors of r-g, and what risks do policy-makers face? Applying regression methods to data on 22 OECD countries over 1970–2018 shows that higher public debt levels are not predictive of more unfavourable r-g in both Eurozone and stand-alone countries, where the latter issue debt in their own currency. The Euro Crisis – a period characterised by doubts over whether the ECB would backstop government bond markets – is linked with more unfavourable r-g, but only in Euro periphery countries. Our results suggest that the Eurozone’s institutional architecture affects r-g risks. While we find that predicted probabilities of future r – g < 0 are typically significantly higher than 50 % across OECD economies under conditions similar to the pre-Covid-19 years, r-g risks are most significant in the Euro periphery. Keywords: Public debt; Interest-growth differentials; Fiscal policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000785 DOI: 10.1016/j.jimonfin.2023.102877 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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