Nonfinancial debt and economic growth in euro-area countries



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Gómez-Puig, Marta and Sosvilla-Rivero, Simón (2017) Nonfinancial debt and economic growth in euro-area countries. [ Working Papers; nº 08, 2017, ]

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In this paper we analyse the effects of all sources of the accumulation of nonfinancial debt (household, corporate as well as government) on economic growth in ten euro-area countries during the 1980-2015 period. To this end, we make use of three models (a baseline, an asymmetric and a threshold model) based on the empirical growth literature augmented by debt to assess whether a debt change has an impact on growth over and above other determinants, treating the different types of borrowers separately. By exploring the time series dimension in order to properly account for the historical experience of each country in the sample, we aim to detect potential heterogeneities in the relationship across euro area countries. Our results with both the baseline and the asymmetric models suggest that although the effects on nonfinancial debt accumulation clearly differ across countries, on average, the highest marginal impact of a rise in debt corresponds to the household and public sector, with an increase in private debt being more harmful in peripheral than in central countries; in contrast, the average effect of a rise in public debt does not differ between these two groups of countries. As for the effects of a debt increase beyond the turning point estimated in the threshold model, our findings indicate that the highest marginal impact corresponds to the household sector.

Item Type:Working Paper or Technical Report
Additional Information:

This paper is based on work supported by the Instituto de Estudios Fiscales [grant IEF 015/2017], the Banco de España [grant PR71/15-20229], the Spanish Ministry of Education, Culture and Sport [grant PRX16/00261] and the Spanish Ministry of Economy and Competitiveness [grant ECO2016-76203-C2-2-P].

Uncontrolled Keywords:Public debt; Household debt; Nonfinancial corporate debt; Economic growth; Heterogeneity; Euro area; Peripheral EMU countries; Central EMU countries
Subjects:Social sciences > Economics > Finance
JEL:C22, D12, F33, H63, O16, O40, O52
Series Name:Working Papers
ID Code:44950
Deposited On:05 Oct 2017 10:11
Last Modified:05 Oct 2017 10:27

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