Does sovereign debt weaken economic growth? A Panel VAR analysis.

Lof, Matthijs and Malinen, Tuomas (2013): Does sovereign debt weaken economic growth? A Panel VAR analysis.

Abstract

We estimate a panel vector autoregressive model to analyze the highly disputed relationship between debt and growth. Using data on 20 developed countries, we find no evidence for a robust effect on debt to growth, even for higher levels of sovereign debt. We do find a significant negative reverse effect of growth to debt, which explains the negative correlation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public debt, debt share, GDP growth
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth

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