ASYMMETRIC IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH IN SELECTED EU COUNTRIES
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The paper explores the asymmetric relation between public debt and economic growth in 13 EU countries in the period 1993 – 2013. A panel data model uncovers a linear relation between debt-to-GDP decrease and GDP growth, while the relation between the debt-to-GDP increase and GDP growth is defined by an inverted U-shaped curve (parabola) with the peak at a 64% debt-to-GDP ratio. We identified two main patterns in relations between debt-to-GDP and GDP growth: (i) hysteresis loop – country data trace the closed circle defined within the debt interval [53%, 113%] (Austria, Finland, Denmark) and (ii) debt trap – country debt-to-GDP ratio breaks the 113% level and indebtedness increase followed by the GDP fall is tracing the diverging tail of parabola (debt trap in Greece, Italy, Portugal).
944 – 958
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