Please use this identifier to cite or link to this item: http://hdl.handle.net/2445/116083
Title: Heterogeneity in the debt-growth nexus: Evidence from EMU countries
Author: Gómez-Puig, Marta
Sosvilla Rivero, Simón, 1961-
Keywords: Deute públic
Creixement econòmic
Zona euro
Public debt
Economic growth
Eurozone
Issue Date: Sep-2017
Publisher: Elsevier
Abstract: The objective of this paper is to examine whether the threshold beyond which a public debt change may have a detrimental effect on economic growth changes across euro area countries during the 1961-2015 period. In contrast with previous studies, we do not use panel estimation techniques, but implement a time-series analysis for each country based on the growth literature. The results suggest that in all the countries but Belgium a debt increase begins to have detrimental effects on growth well before the SGP debt ceiling (a debt ratio of around 40% and 50% in central and peripheral countries, respectively) is reached. So, although austerity policies should be applied in EMU countries - since according to our results debt reduction barely exerts any significant beneficial impact on EMU countries' growth - they should be accompanied by structural reforms that can increase their potential GDP. Moreover, as our results suggest that the harmful impact of a debt change on growth does not occur beyond the same threshold and with the same intensity in all EMU countries, a focus on average ratios and impacts may be unsuitable for defining policies. Specifically, our findings suggest that the pace of fiscal adjustment should be lower in Greece and Spain than in the other countries.
Note: Versió postprint del document publicat a: https://doi.org/10.1016/j.iref.2017.07.008
It is part of: International Review of Economics & Finance, 2017, vol. 51, num. September, p. 470-486
URI: http://hdl.handle.net/2445/116083
Related resource: https://doi.org/10.1016/j.iref.2017.07.008
ISSN: 1059-0560
Appears in Collections:Articles publicats en revistes (Economia)

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