Growth and Productivity: the role of Government Debt

Antonio Afonso and Joao Jalles

No 2011/13, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

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 economic growth; financial crisis are 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. Classification-C23; E62; H50. (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-eff, nep-fdg and nep-pub
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Citations: View citations in EconPapers (18)

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Journal Article: Growth and productivity: The role of government debt (2013)
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