Public Debt and Economic Growth: Further Evidence for the Euro Area

ICEI WP09/17

33 Pages Posted: 25 Sep 2017

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 22, 2017

Abstract

This paper empirically investigates the short and long-run impact of public debt on economic growth. We use annual data from both central and peripheral countries of the euro area (EA) for the 1961-2013 period and estimate a production function augmented with a debt stock term by applying the Autoregressive Distributed Lag (ARDL) bounds testing approach. Our results suggest different patterns across EA countries and tend to support the view that public debt always has a negative impact on the long-run performance of EA member states, whilst its short-run effect may be positive depending on the country.

Keywords: public debt, economic growth, bounds testing, euro area, peripheral euro area countries, central euro area countries

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

Suggested Citation

Gómez-Puig, Marta and Sosvilla-Rivero, Simon, Public Debt and Economic Growth: Further Evidence for the Euro Area (September 22, 2017). ICEI WP09/17. Available at SSRN: https://ssrn.com/abstract=3041117 or http://dx.doi.org/10.2139/ssrn.3041117

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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