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Does debt predict growth? An empirical analysis of the relationship between total debt and economic output

European Journal of Government and Economics

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Title Does debt predict growth? An empirical analysis of the relationship between total debt and economic output
 
Creator Vanlaer, Willem
Marneffe, Wim
Vereeck, Lode
Vanovertveldt, Johan
 
Subject Public Debt; Government Debt; Private Debt; Growth; OECD Countries
H63; O40
 
Description Although the recent global financial crisis has stimulated a vast amount of research on the impact of public debt on economic growth and also increasingly on the role of private credit, the total levels of indebtedness of an economy have largely been ignored. This paper studies the impact of the total level of and increases in debt-to-GDP on economic growth for 26 developed countries in the short, medium and longer term. We analyse whether we can predict the future level of growth, simply by looking at the total level of debt, or increases in that debt level. We find that there is a negative correlation between high levels of debt and short term economic growth, but that this effect tapers in the medium and long term. Similarly, we find that rapid debt accumulation is negatively related to economic growth over the short term, the impact is less pronounced over the medium term and is non-existent over the long term.
 
Publisher Europa Grande
 
Contributor —
 
Date 2015-12-30
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ejge.org/index.php/ejge/article/view/78
 
Source European Journal of Government and Economics; Vol 4, No 2 (2015); 79-103
2254-7088
 
Language eng
 
Relation http://www.ejge.org/index.php/ejge/article/view/78/55
 
Rights Copyright (c) 2015 Willem Vanlaer, Wim Marneffe, Lode Vereeck, Johan Vanovertveldt
http://creativecommons.org/licenses/by/4.0