Growth and productivity: The role of government debt

Antonio Afonso and Joao Jalles

International Review of Economics & Finance, 2013, vol. 25, issue C, 384-407

Abstract: We use a panel of 155 countries to assess the links between growth, productivity and government debt. Via growth equations we assess simultaneity, endogeneity, cross-section dependence, nonlinearities, and threshold effects. We find a negative effect of the debt ratio. For the OECD, the higher the debt maturity the higher the economic growth; financial crisis is detrimental for growth; fiscal consolidation promotes growth; and higher debt ratios are beneficial to TFP growth. The growth impact of a 10% increase in the debt ratio is −0.2% (0.1%) respectively for countries with debt ratios above (below) 90% (30%), and an endogenous debt ratio threshold of 59% can be derived.

Keywords: Government debt; Crises; Panel analysis (search for similar items in EconPapers)
JEL-codes: C23 E62 H50 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (130)

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Working Paper: Growth and Productivity: the role of Government Debt (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:25:y:2013:i:c:p:384-407

DOI: 10.1016/j.iref.2012.07.004

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