On the relation between public debt and economic growth: an empirical investigation

Fincke, Bettina ^[1] ; Greiner, Alfred ^[1]
1. [1] Bielefeld University
  
  Bielefeld University
  
  Kreisfreie Stadt Bielefeld, Alemania
Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 4, Nº. Extra 4, 2015 (Ejemplar dedicado a: Debt and Sustainability), págs. 137-150
Idioma: inglés
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Resumen
- 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.