Does Sovereign Debt Weaken Economic Growth? A Panel VAR Analysis
12 Pages Posted: 22 Jul 2014
Date Written: October 2013
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
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