Public Debt and Economic Growth. Measuring the Long Run Impact in Latin America: 1970-2016

Authors

DOI:

https://doi.org/10.5377/reice.v7i14.9372

Keywords:

Public Duet, Growth, Model DOLS

Abstract

In this work, a measurement is made of the long-term impact of the total gross debt of the central government on the growth of the Real Gross Product for a group of Latin American countries, in the period 1970-2016. For this, cointegration contrasts are used and a dynamic panel data model (DOLS - Dynamic Old Last Squared) is estimated. The evidence indicates that an additional 1% in total government gross debt as a percentage of GDP leads to a reduction in the real GDP growth rate of 0.026%. These results change significantly when Nicaragua is included in the analysis, by virtue of the outliers presented in the debt / GDP ratio by the country for the years 1989 and 1990.

 

Downloads

Download data is not yet available.
Abstract
781
PDF (Español (España)) 505

References

Arellano, M. y Bover, O. (1995). Another Look at the Instrumental Variables Estimation of Error Component Models, Journal of Econometrics, 68, pp. 29–51.

Baltagi, B. H. (2005). Econometric Analysis of Panel Data. Third Edition. John Wiley & Sons.

Baum, A., Checherita-Westphal, C., y Rother, P. (2013). Debt and Growth: New evidence for the euro area. Journal of International Money and Finance, 32, 809-821.

Breitung, J. (2000). The Local Power of Some Unit Root Tests for Panel Data, in: B. Baltagi (ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, Vol. 15, JAI: Amsterdam, pp. 161-178.

Kao, C. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data, Journal of Econometrics, 90, 1–44.

Cecchetti, S. G., Mohanty, M. S., y Zampolli, F. (2011). The real effects of debt.

Diamond, P. A. (1965). National Debt in a Neoclassical Growth Model. The American Economic Review, 55(5), 1126-1150.

Durlauf, S. N., Johnson, P. A., & Temple, J. R. W. (2005). Chapter 8. Growth Econometrics. Handbook of Economic Growth, 555–677. doi:10.1016/s1574-0684(05)01008-7

Granger, C. W. J., y Newbold, P: (1974). Spurious regressions in econometrics. Journal of Econometrics, vol. 2, no 2, pp. 111-20.

Icaza, V. E. (2018). Fiscal fatigue and debt sustainability: Empirical evidence from the Eurozone 1980–2013. Cuadernos de Economía, 41(115), 69-78.

Krugman, P. (1988). Financing vs. forgiving a debt overhang. Journal of Development Economics, 29(3), 253-268.

Lee, S., Park, H., Seo, M. H., y Shin, Y. (2017). Testing for a Debt Threshold Effect on Output Growth. Fiscal Studies, 38(4), 701-717.

Maddala, G. S. Wu, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and A New Simple Test, Oxford Bulletin of Economics and Statistics, 61, 631–52. Simple Test,” Oxford Bulletin of Economics and Statistics, 61, pp. 631–52.

Modigliani, F. (1961). Long-run implications of alternative fiscal policies and the burden of the national debt. The Economic Journal, 71(284), 730-755.
Panizza, U., y Presbitero, A. F. (2014). Public debt and economic growth: is there a causal effect?. Journal of Macroeconomics, 41, 21-41.

Patillo, C., Poirson, H., and Ricci, L. (2002). External debt and growth. IMF Working Paper 02/69, April 2002.

Padoan, P., Sila, U., & Van den Noord, P. (2012). Avoiding debt traps: financial backstops and structural reforms (No. 976). OECD Publishing.

Reinhart, C. M. y Rogoff, K. S (2010). Growth in Time of Debt. American Economic Review: Papers & Proceedings. 100. pp. 573–578. doi=10.1257/aer.100.2.573

Reinhart, C. M., Rogoff, K. S., & Savastano, M. A. (2003). Debt Intolerance (No. w9908). National Bureau of Economic Research.

Saint-Paul, G. (1992). Fiscal Policy in an Endogenous Growth Model. The Quarterly Journal of Economics, 107(4), 1243–1259. doi:10.2307/2118387.

Woo, J., & Kumar, M. S. (2015). Public debt and growth. Economica, 82(328), 705-739.
http://www.carmenreinhart.com/data/ Último acceso: 7 de agosto de 2019.

Downloads

Published

2020-02-05

How to Cite

Rabanal, C., & Helbig, J. (2020). Public Debt and Economic Growth. Measuring the Long Run Impact in Latin America: 1970-2016. Revista Electrónica De Investigación En Ciencias Económicas, 7(14), 27–41. https://doi.org/10.5377/reice.v7i14.9372

Issue

Vol. 7 No. 14 (2019): Junio-Diciembre

Section

Research Articles

License

Copyright (c) Revista Electronica de Investigacion en Ciencias Economicas

The rights to the articles published in REICE are from the journal, in order to be able to manage their best dissemination. However, since the purpose of the same is the dissemination of knowledge, this journal provides immediate free access to its content, under the principle that making research available to the public free of charge, which fosters a greater exchange of global knowledge.

The opinions expressed by the authors do not necessarily reflect the position of the publisher of the publication or of the UNAN-Managua. Its reproduction and distribution is authorized (in any type of support) provided that the following indications are fulfilled:

  • The authorship of the work
  • Indicate its origin (REICE magazine, volume, number and electronic address of the document)