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Public Debt and Economic Growth in Advanced Economies: A Survey

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  • Ugo Panizza

    ()
    (UNCTAD and The Graduate Institute, Geneva)

  • Andrea Filippo Presbitero

    ()
    (Universit… Politecnica delle Marche, MoFiR)

Abstract

This paper surveys the recent literature on the links between public debt and economic growth in advanced economies. We find that theoretical models yield ambiguous results. Whether high levels of public debt have a negative effect on long-run growth is thus an empirical question. While many papers have found a negative correlation between debt and growth, our reading of the empirical literature is that there is no paper that can make a strong case for a causal relationship going from debt to economic growth. We also find that the presence of thresholds and, more in general, of a non-monotone relationship between debt and growth is not robust to small changes in data coverage and empirical techniques. We conclude with a discussion of the challenges involved in measuring and defining public debt and some suggestions for future research which, in our view, should emphasize cross-country heterogeneity.

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Bibliographic Info

Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 78.

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Length: 24
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:anc:wmofir:78

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Keywords: Government Debt; Growth; OECD countries;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Public debt and economic growth, one more time
    by ? in VoxEU.org on 2013-04-25 01:00:00
  2. A new paper on the causality of debt and growth
    by Tyler Cowen in Marginal Revolution on 2013-04-19 18:02:49
  3. Crecimiento económico y deuda pública
    by ? in Tiempo Económico on 2013-04-21 20:23:21
  4. Debt and growth: No ‘tipping point’
    by ? in VoxEU.org on 2013-11-17 00:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Markus Eberhardt & Andrea Filippo Presbitero, 2013. "This Time They're Different: Heterogeneity;and Nonlinearity in the Relationship;between Debt and Growth," Mo.Fi.R. Working Papers 92, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Philip R. Lane, 2013. "Growth And Adjustment Challenges For The Euro Area," The Economic and Social Review, Economic and Social Studies, vol. 44(2), pages 273-295.
  3. Andros Kourtellos & Thanasis Stengos & Chih Ming Tan, 2012. "The Effect of Public Debt on Growth in Multiple Regimes," Working Paper Series 60_12, The Rimini Centre for Economic Analysis.
  4. Salvatore Dell’Erba & Ricardo Hausmann & Ugo Panizza, 2013. "Debt levels, debt composition, and sovereign spreads in emerging and advanced economies," Oxford Review of Economic Policy, Oxford University Press, vol. 29(3), pages 518-547, AUTUMN.
  5. Chudik, Alexander & Mohaddes, Kamiar & Pesaran, M. Hashem & Raissi, Mehdi, 2013. "Debt, inflation and growth robust estimation of long-run effects in dynamic panel data models," Globalization and Monetary Policy Institute Working Paper 162, Federal Reserve Bank of Dallas.
  6. Real Arai & Takuma Kunieda & Keigo Nishida, 2014. "Is Public Debt Growth-Enhancing or Growth-Reducing?," KIER Working Papers 884, Kyoto University, Institute of Economic Research.
  7. Markus Eberhardt, 2013. "Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing," Discussion Papers 2013/06, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  8. Costantini, M. & Fragetta, M. & Melina, G., 2013. "Determinants of Sovereign Bond Yield Spreads in the EMU. An Optimal Currency Area Perspective," Working Papers 13/15, Department of Economics, City University London.
  9. Megersa, kelbesa, 2014. "The laffer curve and the debt-growth link in low-income Sub-Saharan African economies," MPRA Paper 54362, University Library of Munich, Germany.

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