Short-Run and Long-Run Effects of Public Debt on Economic Performance: Evidence from EMU Countries

37 Pages Posted: 15 Sep 2015

See all articles by Marta Gómez-Puig

Marta Gómez-Puig

Economic Theory Department. University of Barcelona

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

Date Written: September 14, 2015

Abstract

This paper contributes to the literature by examining the possible influence of public debt on economic performance, using data from both central and peripheral countries of the European Economic and Monetary Union for the 1960-2012 period. To this end, a simple aggregate production function augmented for public debt is estimated using the ARDL bounds testing approach. Our findings tend to support the view that the level of public debt always has a negative impact on the long-run performance of EMU countries, whilst its short-run effect may be positive in some specific cases.

Keywords: Public debt, economic growth, bounds testing, euro area, peripheral EMU countries, central EMU countries.

JEL Classification: C22, F33, H63, O40, O52.

Suggested Citation

Gómez-Puig, Marta and Sosvilla-Rivero, Simon, Short-Run and Long-Run Effects of Public Debt on Economic Performance: Evidence from EMU Countries (September 14, 2015). Available at SSRN: https://ssrn.com/abstract=2660117 or http://dx.doi.org/10.2139/ssrn.2660117

Marta Gómez-Puig

Economic Theory Department. University of Barcelona ( email )

Diagonal 690
Barcelona, 08034
Spain
34-93-4020113 (Phone)
34-93-4039082 (Fax)

Simon Sosvilla-Rivero (Contact Author)

UCM Institute for Economic Analysis ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

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