Debt Overhang in the Eurozone: A Spatial Panel Analysis
The debt overhang hypothesis suggests that high debt levels retard prospects for GDP growth. We investigate the impact that debt overhang has had on recent GDP growth in the Eurozone, paying particular attention to the spillover effects that debt has on neighboring countries. We argue that in the Eurozone spatial effects are of crucial importance in modeling regional GDP growth, and find that a Spatial Durbin model is appropriate. We find strong evidence for the debt overhang hypothesis, confirming a concave relationship that has been found in other studies where low levels of debt can have a positive impact on GDP, but at some level a “turning point” occurs. The present study finds that this turning point occurs at a lower Debt/GDP ratio than prior studies, and separates out the direct and indirect (spillover) effects on neighboring countries’ GDPs.
References listed on IDEAS
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.:
- Cem Ertur & Wilfried Koch, 2005.
"Growth, Technological Interdependence and Spatial Externalities - Theory and Evidence,"
ERSA conference papers
ersa05p651, European Regional Science Association.
- Cem Ertur & Wilfried Koch, 2007. "Growth, technological interdependence and spatial externalities: theory and evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 1033-1062.
- Cem Ertur & W. Koch, 2007. "Growth, Technological Interdependance and Spatial Externalities: Theory and Evidence," Post-Print halshs-00232616, HAL.
- ERTUR, Cem & KOCH, Wilfried, 2005. "Growth, Technological Interdependence and Spatial Externalities: Theory and Evidence," LEG - Document de travail - Economie 2005-03, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
- Cem Ertur & Wilfried Koch, 2007. "Growth, technological interdependence and spatial externalities : theory and evidence," Post-Print halshs-00203005, HAL.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- Jean Imbs & Romain Rancière, 2005.
"The Overhang Hangover,"
Swiss Finance Institute Research Paper Series
06-03, Swiss Finance Institute.
- Imbs, Jean & Ranciere, Romain, 2005. "The overhang hangover," Policy Research Working Paper Series 3673, The World Bank.
- Imbs, Jean & Ranciere, Romain, 2006. "The Overhang Hangover," CEPREMAP Working Papers (Docweb) 0604, CEPREMAP.
- Jean Imbs & Romain Rancière, 2005. "The overhang hangover," Economics Working Papers 878, Department of Economics and Business, Universitat Pompeu Fabra.
- Imbs, Jean & Rancière, Romain, 2005. "The Overhang Hangover," CEPR Discussion Papers 5210, C.E.P.R. Discussion Papers.
- Jean Imbs & Romain Ranciere, 2005. "The Overhang Hangover," Working Papers 219, Barcelona Graduate School of Economics.
- Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2008.
"A Spatial Cliff-Ord-type Model with Heteroskedastic Innovations: Small and Large Sample Results,"
CESifo Working Paper Series
2485, CESifo Group Munich.
- Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2010. "A Spatial Cliff-Ord-Type Model With Heteroskedastic Innovations: Small And Large Sample Results," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 592-614.
- Siti Daud & Jan Podivinsky, 2011. "Debt–Growth Nexus: A Spatial Econometrics Approach for Developing Countries," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 18(1), pages 1-15, September.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2010.
"Growth in a Time of Debt,"
NBER Working Papers
15639, National Bureau of Economic Research, Inc.
- Jeremy Bulow & Kenneth Rogoff, 1989.
"Sovereign Debt Repurchases: No Cure for Overhang,"
NBER Working Papers
2850, National Bureau of Economic Research, Inc.
- J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
- Enrique López-Bazo & Esther Vayá & Manuel Artís, 2004. "Regional Externalities And Growth: Evidence From European Regions," Journal of Regional Science, Wiley Blackwell, vol. 44(1), pages 43-73.
- Chowdhury, Abdur R., 2001. "The Impact of Financial Reform on Private Savings in Bangladesh," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Cristina Checherita-Westphal & Philipp Rother, 2011. "The Impact of Government Debt on Growth. An Empirical Investigation for the Euro Area," Revue économique, Presses de Sciences-Po, vol. 62(6), pages 1015-1029.
- Göran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
- Sen, Swapan & Kasibhatla, Krishna M. & Stewart, David B., 2007. "Debt overhang and economic growth-the Asian and the Latin American experiences," Economic Systems, Elsevier, vol. 31(1), pages 3-11, March.
- Piras, Gianfranco, 2010. "sphet: Spatial Models with Heteroskedastic Innovations in R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 35(i01).
- Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
When requesting a correction, please mention this item's handle: RePEc:rre:publsh:v:41:y:2011:i:1:p:49-63. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark L. Burkey)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.