How much debt is too much debt?: An empirical analysis on EMU Countries
Autor(a) principal: | |
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Data de Publicação: | 2017 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10071/16511 |
Resumo: | In the aftermath of the global financial crisis, and the subsequent sovereign debt crisis, the relationship between public debt and economic growth was put at the centre of economic policy discussions, specifically regarding the possible existence of a maximum public debt threshold after which economic growth would be severely impaired. By analysing the short-run relationship between public debt and economic growth for a panel of 10 European Monetary Union (EMU) countries over a period of 22 years, from 1995 to 2016, our results suggest that, by following Reinhart and Rogoff (2010) rationale, the debt-to-GDP ratio threshold would be at 120%. Regarding the direction of causality, our results suggest that public debt causes economic growth in most of the countries analysed. However, by splitting the analysis between the pre-crisis and post-crisis periods, we found evidence that the global financial crisis had an effect in changing the causality in the debtgrowth relationship. This analysis also showed that the causal relationship varies across countries. Finally, our threshold analysis provided evidence of a Laffer-curve (inverted Ushape curve) relationship between public debt and economic growth, for which we estimated a maximum public debt threshold around 86% debt-to-GDP ratio. Considering our results and the current public debt levels, governments should pursue policies that allow the decrease of their level of indebtedness to improve economic performance. |
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How much debt is too much debt?: An empirical analysis on EMU CountriesPublic debtEconomic growthGranger-causalityPublic debt threshold effectsPanel data analysisEuropean countriesCrise financeiraDívida públicaCrescimento económicoSME Sistema Monetário EuropeuCausalidade à GrangerEfeitos de limites de dívida públicaAnálise de dados em painelPaíses EuropeusIn the aftermath of the global financial crisis, and the subsequent sovereign debt crisis, the relationship between public debt and economic growth was put at the centre of economic policy discussions, specifically regarding the possible existence of a maximum public debt threshold after which economic growth would be severely impaired. By analysing the short-run relationship between public debt and economic growth for a panel of 10 European Monetary Union (EMU) countries over a period of 22 years, from 1995 to 2016, our results suggest that, by following Reinhart and Rogoff (2010) rationale, the debt-to-GDP ratio threshold would be at 120%. Regarding the direction of causality, our results suggest that public debt causes economic growth in most of the countries analysed. However, by splitting the analysis between the pre-crisis and post-crisis periods, we found evidence that the global financial crisis had an effect in changing the causality in the debtgrowth relationship. This analysis also showed that the causal relationship varies across countries. Finally, our threshold analysis provided evidence of a Laffer-curve (inverted Ushape curve) relationship between public debt and economic growth, for which we estimated a maximum public debt threshold around 86% debt-to-GDP ratio. Considering our results and the current public debt levels, governments should pursue policies that allow the decrease of their level of indebtedness to improve economic performance.Na sequência da crise financeira global, e da subsequentemente crise das dívidas soberanas, a relação entre dívida pública e crescimento económico foi colocada no centro da discussão de políticas económicas, nomeadamente quanto à eventual existência de um nível máximo de dívida pública a partir do qual o crescimento económico seria severamente penalizado. Ao analisar a relação de curto-prazo entre dívida pública e crescimento económico para um painel de 10 países da União Monetária Europeia (UME) durante um período de 22 anos, desde 1995 até 2016, os nossos resultados sugerem que, ao seguir o racional de Reinhart and Rogoff (2010), o rácio dívida-PIB limite seria de 120%. Relativamente à direção de causalidade, os nossos resultados sugerem que dívida pública causa crescimento económico na maioria dos países analisados. No entanto, ao segmentar a análise entre os períodos pré-crise e pós-crise, constatámos que a crise financeira global teve o efeito de alterar a causalidade na relação dívida-crescimento. Esta análise indicou também que a relação de causalidade varia entre países. Por fim, a análise de limites revelou a existência de uma relação curva-de-Laffer (Curva em forma de U invertida) entre dívida pública e crescimento económico, para a qual estimámos um limite de cerca de 86% rácio dívida-PIB. Atendendo aos nossos resultados e aos níveis atuais de dívida pública, os governos devem conduzir políticas que permitam a redução do seu nível de endividamento de forma a melhorar o desempenho económico.2018-07-31T15:03:41Z2019-07-31T00:00:00Z2017-11-29T00:00:00Z2017-11-292017-09info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfapplication/octet-streamhttp://hdl.handle.net/10071/16511TID:201770121engBotelho, Nuno Miguel Rodriguesinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:57:45Zoai:repositorio.iscte-iul.pt:10071/16511Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:29:52.772867Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
How much debt is too much debt?: An empirical analysis on EMU Countries |
title |
How much debt is too much debt?: An empirical analysis on EMU Countries |
spellingShingle |
How much debt is too much debt?: An empirical analysis on EMU Countries Botelho, Nuno Miguel Rodrigues Public debt Economic growth Granger-causality Public debt threshold effects Panel data analysis European countries Crise financeira Dívida pública Crescimento económico SME Sistema Monetário Europeu Causalidade à Granger Efeitos de limites de dívida pública Análise de dados em painel Países Europeus |
title_short |
How much debt is too much debt?: An empirical analysis on EMU Countries |
title_full |
How much debt is too much debt?: An empirical analysis on EMU Countries |
title_fullStr |
How much debt is too much debt?: An empirical analysis on EMU Countries |
title_full_unstemmed |
How much debt is too much debt?: An empirical analysis on EMU Countries |
title_sort |
How much debt is too much debt?: An empirical analysis on EMU Countries |
author |
Botelho, Nuno Miguel Rodrigues |
author_facet |
Botelho, Nuno Miguel Rodrigues |
author_role |
author |
dc.contributor.author.fl_str_mv |
Botelho, Nuno Miguel Rodrigues |
dc.subject.por.fl_str_mv |
Public debt Economic growth Granger-causality Public debt threshold effects Panel data analysis European countries Crise financeira Dívida pública Crescimento económico SME Sistema Monetário Europeu Causalidade à Granger Efeitos de limites de dívida pública Análise de dados em painel Países Europeus |
topic |
Public debt Economic growth Granger-causality Public debt threshold effects Panel data analysis European countries Crise financeira Dívida pública Crescimento económico SME Sistema Monetário Europeu Causalidade à Granger Efeitos de limites de dívida pública Análise de dados em painel Países Europeus |
description |
In the aftermath of the global financial crisis, and the subsequent sovereign debt crisis, the relationship between public debt and economic growth was put at the centre of economic policy discussions, specifically regarding the possible existence of a maximum public debt threshold after which economic growth would be severely impaired. By analysing the short-run relationship between public debt and economic growth for a panel of 10 European Monetary Union (EMU) countries over a period of 22 years, from 1995 to 2016, our results suggest that, by following Reinhart and Rogoff (2010) rationale, the debt-to-GDP ratio threshold would be at 120%. Regarding the direction of causality, our results suggest that public debt causes economic growth in most of the countries analysed. However, by splitting the analysis between the pre-crisis and post-crisis periods, we found evidence that the global financial crisis had an effect in changing the causality in the debtgrowth relationship. This analysis also showed that the causal relationship varies across countries. Finally, our threshold analysis provided evidence of a Laffer-curve (inverted Ushape curve) relationship between public debt and economic growth, for which we estimated a maximum public debt threshold around 86% debt-to-GDP ratio. Considering our results and the current public debt levels, governments should pursue policies that allow the decrease of their level of indebtedness to improve economic performance. |
publishDate |
2017 |
dc.date.none.fl_str_mv |
2017-11-29T00:00:00Z 2017-11-29 2017-09 2018-07-31T15:03:41Z 2019-07-31T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10071/16511 TID:201770121 |
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http://hdl.handle.net/10071/16511 |
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TID:201770121 |
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eng |
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eng |
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info:eu-repo/semantics/openAccess |
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openAccess |
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application/pdf application/octet-stream |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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