Universität zu Köln

Colombier, Carsten and Breuer, Christian (2020). Debt and growth: historical evidence. Econ. Bull., 40 (3). NASHVILLE: ECONOMICS BULLETIN. ISSN 1545-2921

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Abstract

In this present paper, we examine the relationship between public debt and economic growth in a large historical panel dataset of 17 OECD economics over the period from 1870 to 2016. In contrast, the relevant literature focuses on the post-WW-II period. Several empirical studies provide evidence in support of the 'conventional view' that public debt is adversely associated with economic growth. We show that the relationship between government debt and per-capita GDP growth is neither statistically significant and robust nor unambiguous regarding the sign. While our baseline regressions support the 'conventional view', particularly in the aftermath of World War II, these results are not robust to alternative specifications. This holds for a linear as well as a non-linear relationship between public debt and economic growth. Thus, politicians should exercise great caution in using empirical studies on the debt-growth nexus as a guidance for fiscal policy.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Colombier, Carsten UNSPECIFIED UNSPECIFIED UNSPECIFIED Breuer, Christian UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-349843
Journal or Publication Title:	Econ. Bull.
Volume:	40
Number:	3
Date:	2020
Publisher:	ECONOMICS BULLETIN
Place of Publication:	NASHVILLE
ISSN:	1545-2921
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language PUBLIC DEBT; ECONOMIC-GROWTH Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/34984