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Public Debt and Growth
Author(s) -
Woo Jaejoon,
Kumar Manmohan S.
Publication year - 2015
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12138
Subject(s) - debt , economics , currency , monetary economics , public capital , debt to gdp ratio , internal debt , emerging markets , debt levels and flows , international economics , public investment , macroeconomics , fiscal policy
The recent global financial crisis has led to an unprecedented increase in public debt across the world, raising serious concerns about its economic impact. This paper examines the impact of high public debt on long‐run economic growth in a large panel of countries over the last four decades. High initial public debt is found to be significantly associated with slower subsequent growth. Non‐linearities, currency denomination of debt and differences between advanced and emerging market economies are explored. The adverse effect largely reflects a slowdown in labour productivity growth mainly due to slower capital accumulation. Extensive robustness checks confirm the results.