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The public debt level is nowadays an issue on which the general public has been particularly concerned. The importance of public debt level is mainly related with its impact on economic growth. There is a large body of policymaker who consider that high levels of public debt give rise to a reduction in economic growth in the long-run. This paper extends the existing empirical literature on the relationship between public debt and economic growth by analyzing the impact of public debt on economic growth in the core and periphery European countries, allowing cross-country heterogeneity and considering the trajectory of debt.

What happens to the relationship between public debt and economic growth in European countries?