The spending multiplier in a time of massive public debt : the euro area case
AbstractThis paper argues that in Euro-area economies, where the ECB cannot bail-out …nancially distressed governments, the …scal multiplier is adversely a¤ected by the amount of public debt. A regression model on a panel of 26 EU countries over the period 1996-2011 shows that a 10 percentage point increase in the debt-to-GDP ratio is connected to a slowdown in annual growth rates of 0.28 percentage point. Furthermore, the e¤ectiveness of …scal spending is adversely a¤ected by the amount of public debt; for a debt-to-GDP ratio above 150% the impact on growth of the …scal stimulus turns negative.
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Bibliographic InfoPaper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number WP1209.
Length: 13 pages
Date of creation: 11 Feb 2012
Date of revision: 11 Feb 2012
Fiscal multiplier; Euro-area; Public debt; Illiquidity; the Great Recession;
Other versions of this item:
- Radu Vranceanu & Damien Besancenot, 2013. "The spending multiplier in a time of massive public debt: The Euro-area case," Applied Economics Letters, Taylor & Francis Journals, vol. 20(8), pages 758-762, May.
- Radu Vranceanu & Damien Besancenot, 2012. "The spending multiplier in a time of massive public debt : the euro area case," Post-Print hal-00728230, HAL.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-16 (All new papers)
- NEP-EEC-2012-09-16 (European Economics)
- NEP-PBE-2012-09-16 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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