Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320185 
Year of Publication: 
2023
Citation: 
[Journal:] The European Journal of Comparative Economics (EJCE) [ISSN:] 1824-2979 [Volume:] 20 [Issue:] 1 [Year:] 2023 [Pages:] 39-70
Publisher: 
University Carlo Cattaneo (LIUC), Castellanza
Abstract: 
Rising debt can threaten macroeconomic, financial, and fiscal stability, and thus fuels uncertainty among economic agents. Therefore, high levels of indebtedness may hinder economic growth especially for those economies with a large debt burden and may also amplify the volatility of GDP growth rates. This can be particularly true when we consider a currency area, such as the European Monetary Union (EMU), whose economies are characterized by different structural features and by political and social instability. In 2019, the private and public debt of the EMU reached 206% and 86% of GDP, respectively. The purpose of this paper is to investigate the relationship between economic growth and debt for the EMU countries during the 2000-2019 period using a two-steps approach. We first provide a breakdown of private and public debt-to-GDP ratios and their changes over time, both at the eurozone-level and at country-level. Then we employ fixed effects panel regression to investigate the relationships between i) real GDP per capita growth and debt, and ii) GDP growth volatility and debt, and to investigate which channels could be responsible for the effects of debt on economic growth. It emerges that debt-to-GDP ratios are linked negatively to economic growth and positively to growth volatility. Some policy implications arise, such as the need to stabilize private and public debt, promote growth, and foster coordination among the policies of the EMU member states.
Subjects: 
Private debt
Public debt
Economic growth
Growth volatility
Euro area
JEL: 
E44
F65
H63
O47
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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