Does Sovereign Debt Weaken Economic Growth? A Panel VAR Analysis

12 Pages Posted: 22 Jul 2014

See all articles by Matthijs Lof

Matthijs Lof

Aalto University

Tuomas Malinen

HECER, University of Helsinki

Date Written: October 2013

Abstract

We estimate panel vector autoregressions to analyze the highly disputed relationship between sovereign debt and economic growth. Using data on 20 developed countries, we find no evidence for a robust effect of debt on growth, even for higher levels of debt. We do find a significant negative reverse effect of growth on debt, which explains the negative correlation.

Keywords: Public debt, Debt share, GDP growth

JEL Classification: H63, O43, C33

Suggested Citation

Lof, Matthijs and Malinen, Tuomas, Does Sovereign Debt Weaken Economic Growth? A Panel VAR Analysis (October 2013). Economics Letters, Vol. 122, No. 3, 2014, Available at SSRN: https://ssrn.com/abstract=2469159

Matthijs Lof (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

HOME PAGE: http://sites.google.com/site/matthijslof/

Tuomas Malinen

HECER, University of Helsinki ( email )

Helsinki, 00014
Finland

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