Public Debt and Economic Growth in European Economies: Evidence from Fourier Toda–Yamamoto Causality Approach

Sinem Pınar Gürel
Additional contact information
Sinem Pınar Gürel: Pamukkale University

Business and Economics Research Journal, 2026, vol. 17, issue 4, 501-521

Abstract: This study investigates the causal relationship between public debt and economic growth in selected European countries over the period 2000Q4-2025Q1. The analysis employs the Fourier Toda-Yamamoto causality approach, which endogenously accounts for smooth structural breaks, and compares its results with those obtained from the standard Toda–Yamamoto framework. The empirical findings indicate that public debt-to-GDP series—with the exception of France—exhibit significant structural breaks. While the standard Toda–Yamamoto test identifies limited causal relationships, the Fourier-based approach uncovers additional causal relationships that remain undetected when structural breaks are ignored. Specifically, the Fourier Toda–Yamamoto test reveals bidirectional causality in Germany, Finland, France, and Italy, suggesting a close interaction between fiscal policy and economic performance in these economies. In contrast, Austria, Greece, and Portugal exhibit unidirectional causality running from economic growth to public debt, highlighting the sensitivity of fiscal positions to changes in economic activity. No causal relationship is identified for the Netherlands and Spain. By explicitly accounting for smooth structural breaks and comparing standard and Fourier-based causality results, the study contributes to the literature by demonstrating that ignoring structural breaks may conceal important causal relationships between public debt and economic growth. These findings further support the need for more flexible and country-specific fiscal frameworks across that take into account the structural heterogeneity across the selected European countries.

Keywords: Public Debt; Economic Growth; Fourier Toda-Yamamoto Causality; Structural Breaks; European Countries (search for similar items in EconPapers)
JEL-codes: C22 E62 H63 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.berjournal.com/public-debt-and-economi ... o-causality-approach

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:023908

DOI: 10.20409/berj.2026.509

Access Statistics for this article

Business and Economics Research Journal is currently edited by Adem Anbar

More articles in Business and Economics Research Journal from Bursa Uludag University, Faculty of Economics and Administrative Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Adem Anbar ().