On the relation between public debt and economic growth: an empirical investigation

Bettina Fincke and Alfred Greiner

Economics and Business Letters, 2015, vol. 4, issue 4, 137-150

Abstract: In this paper we empirically study the relation between public debt and economic growth. We analyze how the public debt to GDP ratio at a certain point in time is correlated with the GDP growth rate in the following period, where we consider a one-year time span, a three-years time interval and a five-years interval. Using panel data comprising seven developed countries from 1970-2012, we estimate a pooled regression model and a random effects model. We find strong evidence for a significantly negative relation between debt and growth. Further, for most specifications this relationship does not seem to be characterized by non-linearities.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ove:journl:aid:10696

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