What happens to the relationship between public debt and economic growth in European countries?

Rebeca Jimenez-Rodriguez, Araceli Rodríguez-López


The public debt level is nowadays an issue on which the general public has been particularly concerned. The importance of public debt level is mainly related with its impact on economic growth. There is a large body of policymaker who consider that high levels of public debt give rise to a reduction in economic growth in the long-run. This paper extends the existing empirical literature on the relationship between public debt and economic growth by analyzing the impact of public debt on economic growth in the core and periphery European countries, allowing cross-country heterogeneity and considering the trajectory of debt.

Full Text:



Aizenman, J., Kletzer, K. and Pinto B. (2007) Economic growth with constraints on tax revenues and public debt: Implications for fiscal policy and cross-country differences. NBER Working Paper No. 12750.

Baum, A., Checherita-Westphal, C. and Rother, P. (2013) Debt and growth: New evidence for the euro area, Journal of International Money and Finance, 32, 809-821.

Cecchetti, S. G., Mohanty M. S., and Zampolli, F. (2011) The real effects of debt, Bank of International Settlements Working Papers No. 352.

Checherita-Westphal, C. and Rother, P. (2012) The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area, European Economic Review, 56, 1392-1405.

Diks, C. and Panchenko, V. (2006) A new statistic and practical guidelines for nonparametric granger causality testing, Journal of Economic Dynamics and Control, 30, 1647-1669.

Johansen, S. (1995) Likelihood Based Inference in Cointegrated Vector Autoregressive Models, Oxford: Oxford University Press.

Mencinger J., Aristovnik, A. and Verbič, M. (2014) The Impact of growing public debt on economic growth in the European Union, Amfiteatru Economic 16, 403-414.

Panizza, U. and Presbitero, A.F. (2013) Public debt and economic growth in advanced economies: A survey, MOFiR Working Paper No. 78.

Panizza, U. and Presbitero, A.F. (2014) Public debt and economic growth: Is there a causal effect?, Journal of Macroeconomics, 41, 21-41.

Pescatori, A., Sandri, D. and Simon, J. (2014) Debt and growth: Is there a magic threshold?, IMF Working Paper No. 34.

Reinhart, C.M., Rogoff, K.S. and Savastano, M.A. (2003) Debt intolerance, Brookings Papers on Economic Activity, 34, 1-74.

Reinhart, C.M. and Rogoff, K.S. (2010) Growth in a time of debt, American Economic Review, 100, 573-578.

Reinhart, C.M., Reinhart, V.R. and Rogoff, K.S. (2012) Public debt overhangs: Advanced-economy episodes since 1800, Journal of Economic Perspectives 26, 69-86.

Saint-Paul, G. (1992) Fiscal policy in an endogenous growth model. Quarterly Journal of Economics, 107, 1243–1259.

Toda, H.Y. and Yamamoto, H. (1995) Statistical inference in vector autoregressions with possibly integrated processes, Journal of Econometrics 66, 225-250.

Woo, J. and Kumar M.S., (2015) Public debt and growth, Forthcoming in Economica.

DOI: https://doi.org/10.17811/ebl.4.4.2015.151-160


  • There are currently no refbacks.

ISSN: 2254-4380