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Public debt and economic growth in Spain, 1851–2013

Author

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  • Vicente Esteve

    (Universidad de Valencia
    Universidad de Alcalá)

  • Cecilio Tamarit

    () (Universidad de Valencia)

Abstract

Abstract In this paper we investigate the long-run relationship between public debt and economic growth in the Spanish economy for the period 1851–2013. We develop a cliometric analysis of the debt–growth nexus using novel time series methods. We find some support for a negative relationship between both variables, but no clear evidence of a debt threshold. The estimated long-run elasticity in a one-break model shows a tendency to decrease over time from a nonsignificant 0.011 to a −0.070, indicating that a 10 percentage increase in the public debt-to-GDP ratio is associated with 0.70 percentage points lower real economic growth. Indeed, we find for the first subsample (1851–1939) either “decoupling” or “saturation,” while in the second subsample (1940–2000) the long-run elasticity coefficient becomes negative and significant. When we extend our analysis up to 2013, we find a break in 1971 coinciding with the twilight of Franco’s dictatorship and the Spanish transition to democracy.

Suggested Citation

  • Vicente Esteve & Cecilio Tamarit, 2018. "Public debt and economic growth in Spain, 1851–2013," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(2), pages 219-249, May.
  • Handle: RePEc:spr:cliomt:v:12:y:2018:i:2:d:10.1007_s11698-017-0159-8
    DOI: 10.1007/s11698-017-0159-8
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    Cited by:

    1. Antonio Fatás & Atish R. Ghosh & Ugo Panizza & Andrea F Presbitero, 2019. "The Motives to Borrow," IMF Working Papers 19/101, International Monetary Fund.

    More about this item

    Keywords

    Public debt; Economic growth; Fiscal policy; Cointegration; Multiple structural breaks;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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