National Bureau of Economic Research.īaldacci, E., Clements, B., Gupta, S., & Cui, Q. Growth with constraints on tax revenues and public debt: implications for fiscal policy and cross-country differences (Tech. The role of domestic debt markets in economic growth: An empirical investigation for low-income countries and emerging markets. H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt Debt Management Sovereign DebtĪbbas, S. Public Debt, Economic Growth, Panel ARDL, Causality, European Union Public Debt and Economic Growth nexus: A Dynamic Panel ARDL approach However, the direction of causality varies between countries with high and low average debt-to-GDP ratio. Evidence of bidirectional causality is detected for the full panel of countries. Finally, a Dumitrescu Hurlin panel causality test is carried out to establish the causal direction between debt and growth. The debt and growth nexus, although of different magnitudes, is also negative across high and low levels of debt and across different time periods. The full panel ARDL estimation illustrates a negative relationship between debt and growth both over the long and short-term. This mitigates some limitations of previous empirical literature that explains either the short- or long-run effect. This framework helps in determining both the long and short-run impact of debt on growth. A panel autoregressive distributed lag model (ARDL) is used to analyse the impact of debt on growth. This empirical study examines the debt and growth nexus for a panel of 25 European Union member states over the 1996-2017 period. The impact of public debt on economic growth has been a pertinent topic over the last decade following the financial and global economic crisis. Public Debt and Economic Growth nexus: A Dynamic Panel ARDL approach.
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