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Public Debt and Productivity

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  • Rodolphe Blavy
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    Abstract

    The paper analyzes Jamaica''s experience of low growth despite consistently high investment. Cross-country analysis provides evidence of a significant and negative relationship between total public debt and productivity growth. Looking at the specific channels through which high debt affects productivity growth and the allocation of resources in Jamaica, the study finds that high public debt has been associated with macroeconomic uncertainty and an output structure that relied excessively on a few maturing sectors with limited scope for productivity growth. Furthermore, public investment has been crowded out by debt service, further adversely affecting productivity growth.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/235.

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    Length: 25
    Date of creation: 01 Oct 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/235

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    Related research

    Keywords: External debt; Public debt; Productivity; Economic growth; Public investment; Resource allocation; Economic models; gdp growth; total factor productivity; debt threshold; growth accounting; debt service; debt overhang; domestic debt; real gdp; debt burden; capital formation; growth rates; fixed capital formation; indebted countries; debt public; repayment ability; debt stock; debt relief; domestic public debt; growth rate; gdp per capita; gdp growth rate; central bank; public sector debt; public enterprise debt; national income; debt sustainability; external debt burden; net present value of debt; debt stock variable; debt stocks; international lending; low debt; government debt; highly indebted countries; external shocks; debt problems;

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    1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    2. Toan Quoc Nguyen & Benedict J. Clements & Rina Bhattacharya, 2003. "External Debt, Public Investment, and Growth in Low-Income Countries," IMF Working Papers, International Monetary Fund 03/249, International Monetary Fund.
    3. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002. "External Debt and Growth," IMF Working Papers, International Monetary Fund 02/69, International Monetary Fund.
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    Cited by:
    1. António Afonso & João Tovar Jalles, 2013. "Fiscal Composition and Long-term Growth," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
    2. Klaus-Stefan Enders, 2007. "Egypt," IMF Working Papers, International Monetary Fund 07/57, International Monetary Fund.
    3. World Bank, 2011. "Jamaica - Country Economic Memorandum : Unlocking Growth," World Bank Other Operational Studies 2756, The World Bank.

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