Asymmetric Impact of Public Debt on Economic Growth in Selected EU Countries
Asymmetric Impact of Public Debt on Economic Growth in Selected EU Countries
Author(s): Veronika Šulíková, Mihajlo Đukić, Vladimír Gazda, Denis Horváth, Lumír KulhánekSubject(s): Economy, National Economy, Public Finances
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: public debt; economic growth; debt trap; dynamic panel data model; non-linear relation; asymmetric relation
Summary/Abstract: The paper explores the asymmetric relation between public debt and economic growth in 13 EU countries in the period 1993 – 2013. A panel data model uncovers a linear relation between debt-to-GDP decrease and GDP growth, while the relation between the debt-to-GDP increase and GDP growth is defined by an inverted U-shaped curve (parabola) with the peak at a 64% debt-to-GDP ratio. We identified two main patterns in relations between debt-to-GDP and GDP growth: (i) hysteresis loop – country data trace the closed circle defined within the debt interval [53%, 113%] (Austria, Finland, Denmark) and (ii) debt trap – country debt-to-GDP ratio breaks the 113% level and indebtedness increase followed by the GDP fall is tracing the diverging tail of parabola (debt trap in Greece, Italy, Portugal).
Journal: Ekonomický časopis
- Issue Year: 63/2015
- Issue No: 09
- Page Range: 944-958
- Page Count: 15
- Language: English