Date of Publication

2019 12:00 AM

Security Theme

Economic Stability

Keywords

srhreports, economicstability, public debt, economic stability, economic growth, GDP, Latin America, GDP volatility, macroeconomic stability, Colombia, Peru, Argentina, Mexico, Brazil, Ecuador, Bolivia

Description

"We study the effect of public indebtedness on economic growth in Latin American economies. Our main findings indicate that a Public Debt-GDP ratio of 75% leads to a deceleration in growth. On the other hand, a ratio of 35% increases the growth volatility. By using a Panel VAR we also found that external shocks, such as the foreign capital flows and the terms of trade, influence in the public debt effect on the economic growth. Clearly, the higher the level of public debt, the more vulnerable the economy can be in the short term; however, in the long term the growth is relevant for fiscal sustainability."

Comments

This article is licensed under a Creative Commons Attribution 4.0 International License

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COinS
 
Jan 1st, 12:00 AM

Public Debt and Stability in Economic Growth: Evidence for Latin America

"We study the effect of public indebtedness on economic growth in Latin American economies. Our main findings indicate that a Public Debt-GDP ratio of 75% leads to a deceleration in growth. On the other hand, a ratio of 35% increases the growth volatility. By using a Panel VAR we also found that external shocks, such as the foreign capital flows and the terms of trade, influence in the public debt effect on the economic growth. Clearly, the higher the level of public debt, the more vulnerable the economy can be in the short term; however, in the long term the growth is relevant for fiscal sustainability."

 
 

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