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The Internal-External Debt Ratio and Economic Growth

Author

Listed:
  • Tilemahos Efthimiadis

    () (Research Fellow, Centre of Planning and Economic Research, Athens, Greece)

  • Panagiotis Tsintzos

    () (Lecturer (elected), Dept. of Int. Economic Relations and Development, Democritus Univ. of Thrace)

Abstract

In this paper we examine the effects of the ratio of internal to external public debt on a country's economic growth. These effects are examined through a competitive, decentralized model of endogenous economic growth, which relies on public investments. Our findings show that as the internal-external public debt ratio increases, the public to private capital ratio increases which in turn positively affects the long run economic growth rate. The main conclusion of this paper is that the out flow of domestic capital which is needed to service external debt has unfavorable repercussions on an economy's long run steady state growth rate.

Suggested Citation

  • Tilemahos Efthimiadis & Panagiotis Tsintzos, 2012. "The Internal-External Debt Ratio and Economic Growth," Economics Bulletin, AccessEcon, vol. 32(1), pages 941-951.
  • Handle: RePEc:ebl:ecbull:eb-11-00632
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    growth; public debt;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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