The impact of government debt on economic growth: An empirical investigation of the Greek market

We propose a diffusion process to describe the global dynamic evolution of credit operations at a national level given observed operations at a subnational level in a sovereign country. Empirical analysis with a unique dataset from Brazilian federate constituents supports the conclusions. Despite the heterogeneity observed in credit operations at a subnational level, the aggregated dynamics at a national level were accurately described by the proposed model. Results may guide management of public finances, particularly debt manager authorities in charge of reaching surplus targets.

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“…Indeed, poorly managed public debt has been an important factor in inducing and propagating recent economic crises [5, 6]. …”

Section: Introductionmentioning

confidence: 99%

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Rocha¹,

Rocha

Souza³

2017

PLoS ONE

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“…As to the results of control variables, the results show that a country will have a lower economic growth with an increase in its population growth. Checherita-Westphal and Rother (2012), Kourtellos, Stengos, and Tan (2013), and Spilioti and Vamvoukas (2015) also find that an increase in population growth harms economic growth. However, our results show insignificant impacts of investment, savings, inflation, and trade openness on economic growth.…”

Section: Resultsmentioning

confidence: 95%

“…They find no significant evidence for the impact of sovereign debt on economic growth, but the negative impact of economic growth on sovereign debt is present. For Greece, Spilioti and Vamvoukas () indicate that there is a positive relationship between government debt and economic growth. Applying the panel Granger causality test, Puente‐Ajovín and Sanso‐Navarro () show that government debt Granger causes economic growth for 14 of 16 Organization for Economic Co‐operation and Development (OECD) countries…”

Section: Literature Reviewmentioning

confidence: 99%

On the Impact of Public Debt on Economic Growth: Does Country Risk Matter?

Chiu

2017

Contemporary Economic Policy

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This study examines the nonlinear impacts of four country risk indices on the debt‐growth nexus for 61 countries in a panel data framework. Our results show evidence of the different debt‐growth nexus under the different degrees of country risk. Under a high‐risk environment, a country's economic growth is harmed by raising its public debt. The negative effects public debt has on economic growth become weak under low political and financial‐risk environments, while an increase in public debt could help to stimulate economic growth under low composite and economic risk environments. In addition, the differences of countries' income and debt levels also lead country risks to have different effects on the debt‐growth nexus, suggesting that a country should borrow appropriately based on its current risk environments while improving economic performance. (JEL C33, E02, H63, O43)

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“…Kumar and Woo argued that high initial debt had inverse effects on long-run economic growth and that negative, non-linear effects could not be excluded if debt exceeded 90% of GDP (Kumar & Woo 2015, p. 731). The results returned by Spilioti and Vamvoukas (2015) implied that government debt correlated positively with economic activity as long as it did not exceed 110% of GDP. Dar and Amirkhalkhali (2002) based their study on the TFP (Total Factor Productivity) measure and capital productivity as approximations for economic growth and proved that both were lower in countries where government, measured by debt-to-GDP ratio, was larger.…”

Section: Literature Reviewmentioning

confidence: 97%

The Impact of the Monetary-fiscal Policy Mix and Financialisation on Fixed Asset Investment in the EU in 1999–2014

Malinowska

2016

AOC

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This paper explores the combined impact of tight monetary policy, government debt, budgetary deficit, financialisation, and financial leverage on the fixed asset investment (FAI) of non-financial private firms in EU countries in the 1999-2014 period. I estimate eight static fixed-effects models and test for six hypotheses. While inconclusive regarding the combined impact of tight monetary policy and government debt, the results suggest that the influence of monetary policy was limited only to the euro area, suggesting that national monetary policies were inconsequential with regard to changes in FAI. Despite the detrimental effects of financialisation, the findings highlight that cash flows generated from the sector's financial assets might serve as an internal source of FAI funding that strongly correlates with monetary contractions. The findings also highlight the possibility of an active balance sheet channel. However, given the macro-level character of the data, further research on the micro-level might provide more insight into specific issues.

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The impact of government debt on economic growth: An empirical investigation of the Greek market

Cited by 56 publications

References 6 publications

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

On the Impact of Public Debt on Economic Growth: Does Country Risk Matter?

The Impact of the Monetary-fiscal Policy Mix and Financialisation on Fixed Asset Investment in the EU in 1999–2014

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