The causal relationship between debt and growth in EMU countries



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Gómez-Puig, Marta and Sosvilla-Rivero, Simón (2015) The causal relationship between debt and growth in EMU countries. Journal of Policy Modeling, 37 (6). pp. 974-989. ISSN 0161-8938

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New evidence is presented on the possible existence of bi-directional causal relationships between public debt and economic growth in both central and peripheral countries of the European Economic and Monetary Union. We test for heterogeneity in the bi-directional Granger-causality across both time and space during the period between 1980 and 2013. The results suggest evidence of a “diabolic loop” between low economic growth and high public debt levels in Spain after 2009. For Belgium, Greece, Italy and the Netherlands debt has a negative effect over growth from an endogenously determined breakpoint and above a debt threshold ranging from 56% to 103% depending on the country.

Item Type:Article
Uncontrolled Keywords:Public debt; Economic growth; Granger-causality; Peripheral EMU countries; Central EMU countries
Subjects:Social sciences > Economics > Economic development
Social sciences > Economics > Econometrics
Social sciences > Economics > World economy
Social sciences > Economics > Public economy
JEL:C22, F33, H63, O40, O52
ID Code:59875
Deposited On:02 Apr 2020 12:03
Last Modified:24 Apr 2020 09:38

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