Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Peace Economics, Peace Science and Public Policy

Editor-in-Chief: Caruso, Raul

Ed. by Bove, Vincenzo / Kibris, Arzu / Sekeris, Petros

4 Issues per year


CiteScore 2017: 0.54

SCImago Journal Rank (SJR) 2017: 0.304
Source Normalized Impact per Paper (SNIP) 2017: 0.540

Online
ISSN
1554-8597
See all formats and pricing
More options …
Ahead of print

Issues

Volume 17 (2011)

Volume 4 (1996)

Volume 3 (1995)

Volume 2 (1994)

Volume 1 (1993)

Government Debt and Economic Growth. A Threshold Analysis for Greece

Panagiotis Pegkas
Published Online: 2018-10-01 | DOI: https://doi.org/10.1515/peps-2018-0003

Abstract

This study addresses the issue of threshold effects between general government debt and economic growth in Greece over the period 1970–2016. Using threshold models, there is evidence in favour of a negative association between general government debt and economic growth. The results indicate that the magnitude of this negative relationship between debt and growth depends on debt regimes. Also, the results seem to suggest that public debt might be associated with lower growth at low and moderate public debt levels. Specifically, at debt levels lower than 23.5 percent of GDP, increases in the general government debt-to-GDP ratio are associated with higher negative effect on economic growth, than at very high debt levels of 109.4 percent of GDP. The overall results could explain why general government debt was a significant drag on economic growth of Greece and that the crisis is far from over as thresholds are still binding.

Keywords: government debt; economic growth; Greece

JEL Classification: C24; O40; H63

References

  • AMECO database. n.d. Available at: http://ec.europa.eu/economyfinance/ameco/user/serie/SelectSerie.cfm (accessed July 2018).

  • Apergis, N., & Mamatzakis, E. (2014). What are the driving factors behind the rise of spreads and CDS of euro-area sovereign bonds? A FAVAR model for Greece and Ireland. International Journal of Economics and Business Research, 7(1), 104–120.CrossrefGoogle Scholar

  • Bai, J., & Perron, P. (1998). Estimating and testing linear models with multiple structural changes. Econometrica, 66(1), 47–78.CrossrefGoogle Scholar

  • Bai, J., & Perron, P. (2003a). Critical values for multiple structural change tests. Econometrics Journal, 6(1), 72–78.CrossrefGoogle Scholar

  • Bai, J., & Perron, P. (2003b). Computation and analysis of multiple structural change models. Journal of Applied Econometrics, 18(1), 1–22.CrossrefGoogle Scholar

  • Baglan, D., & Yoldas, E. (2013). Government debt andmacroeconomic activity: a predictive analysis for advanced economies. Federal Reserve Board Finance and Economics Discussion Series No. 201305, Federal Reserve Board, Washington, DC.Google Scholar

  • Bökemeier, B., & Greiner, A. (2015). On the relation between public debt and economic growth: An empirical investigation. Economics and Business Letters, 4(4), 137–150.CrossrefGoogle Scholar

  • Caner, M., Grennes, T., & Koehler-Geib, F. (2010). Finding the tipping point – when sovereign debtturns bad. World Bank Policy Research Working Paper No. 5391, Washington DC, The World Bank.Google Scholar

  • Caruso, R., & Domizio, M. D. (2017). Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988–2013). Defense and Peace Economics, 28(5), 534–549.CrossrefGoogle Scholar

  • Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56, 1392–1405.CrossrefWeb of ScienceGoogle Scholar

  • Cuestas, J. C., Gil-Alana, L., & Staehr, K. (2014). Government debt dynamics and the global financial crisis: Has anything changed in the EA12? Economics Letters, 124(1), 64–66.CrossrefWeb of ScienceGoogle Scholar

  • Dickey, D. A., & Fuller W. A. (1979). Distributions of the estimators for autoregressive time series with a unit root. Journal of American Statistical Association, 74, 427–431.Google Scholar

  • Dickey, D. A., & Fuller W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49, 1057–1072.CrossrefGoogle Scholar

  • Eberhardt, M., & Presbitero, A. (2015). Public debt and growth: Heterogeneity and non-linearity. Journal of International Economics, 97(1), 45–58.CrossrefWeb of ScienceGoogle Scholar

  • Elmeskov, J., & Sutherland, D. (2012). Post-crisis debt overhang: growth implications across countries, Second International Research Conference 2012: Monetary Policy, Sovereign Debt and Financial Stability: The New Trilemma, Mumbai, India.Google Scholar

  • Egert B. (2015a). Public debt, economic growth and nonlinear effects: Myth or reality? Journal of Macroeconomics, 43, 226–238.Web of ScienceCrossrefGoogle Scholar

  • Egert, B. (2015b). The 90% Public debt threshold: the rise and fall of a stylised fact. Applied Economics, 47, 3756–3770.CrossrefGoogle Scholar

  • Furceri, D., & Zdzienicka, A. (2012). How costly are debt crises? Journal of International Money and Finance, 31(4), 726–742.Web of ScienceCrossrefGoogle Scholar

  • Greiner, A. (2011). Sustainability of public debt: Some theoretical considerations. Economics Bulletin, 31(4), 3311–3319.Google Scholar

  • International Monetary Fund. (2016). Fiscal Monitor: Debt Use It Wisely. Washington, October. Available online: www.imf.org/external/pubs/ft/fm/2016/02/pdf/fm1602.pdf. (accessed on 15 June 2018).

  • Legrenzi, G., & Milas, C. (2013). Modelling the fiscal reaction functions of the GIPS based on state-varying thresholds. Economics Letters, 121(3), 384–389.CrossrefWeb of ScienceGoogle Scholar

  • MacKinnon, J. G. (1996). Numerical distribution functions for unit root and cointegration tests. Journal of Applied Econometrics, 11(6), 601–618.CrossrefGoogle Scholar

  • Perron, P. (1989). The great crash, the oil price shock, and the unit root hypothesis. Econometrica, 57, 1361–1401.CrossrefGoogle Scholar

  • Perron, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80, 355–385.CrossrefGoogle Scholar

  • Pescatori, A., Sandri, D., & Simon J. (2014). Debt and growth: is there a magic threshold? International Monetary Fund, paper No.14–34.Google Scholar

  • Reinhart, C., & Rogoff, K. (2010). Growth in a time of debt, American economic review. American Economic Association, 100(2), 573–578.Google Scholar

  • Reinhart, C., Reinhart, V., & Rogoff, K. (2012). Public debt overhangs: advanced-economy episodes since 1800. Journal of Economic Perspectives, 26(3), 69–86.CrossrefWeb of ScienceGoogle Scholar

  • Schneider, F. (2011). The shadow economy labour force. World Economics, 12(4), 53–92.Google Scholar

  • Sutherland, D., & Hoeller, P. (2012). Debt and macroeconomic stability: an overview of the literature and some empirics. OECD Economics Department Working Papers 1006, OECD Publishing.Google Scholar

  • Swamy, V. (2015). Government debt and its macroeconomic determinants – an empirical investigation. MPRA Paper 64106.Google Scholar

About the article

Published Online: 2018-10-01


Citation Information: Peace Economics, Peace Science and Public Policy, 20180003, ISSN (Online) 1554-8597, DOI: https://doi.org/10.1515/peps-2018-0003.

Export Citation

©2018 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in