On the Relation between Public Debt and Economic Growth: An Empirical Investigation

19 Pages Posted: 3 Dec 2013

See all articles by Bettina Bökemeier

Bettina Bökemeier

Bielefeld University

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: December 3, 2013

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.

Keywords: Public Debt, Economic Growth, Empirics

JEL Classification: E62, H63

Suggested Citation

Bökemeier, Bettina and Greiner, Alfred, On the Relation between Public Debt and Economic Growth: An Empirical Investigation (December 3, 2013). Bielefeld Working Papers in Economics and Management No. 24-2013, Available at SSRN: https://ssrn.com/abstract=2362788

Bettina Bökemeier (Contact Author)

Bielefeld University ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

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