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Growth and Productivity: the role of Government Debt

Listed author(s):
  • António Afonso
  • João Tovar Jalles

We use a panel of 155 countries to assess the links between growth, productivity and government debt. Via growth equations we assess simultaneity, endogeneity, cross-section dependence, nonlinearities, and threshold effects. We find a negative effect of the debt ratio. For the OECD, the higher the debt maturity the higher economic growth; financial crisis are detrimental for growth; fiscal consolidation promotes growth; and higher debt ratios are beneficial to TFP growth. The growth impact of a 10% increase in the debt ratio is -0.2% (0.1%) respectively for countries with debt ratios above (below) 90% (30%), and an endogenous debt ratio threshold of 59% can be derived.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp132011.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2011/13.

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Date of creation: Jul 2011
Handle: RePEc:ise:isegwp:wp132011
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Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL

Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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