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Government Debt and Economic Growth. A Threshold Analysis for Greece

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  • Pegkas Panagiotis

    (University of Thessaly School of Science, Papasiopoulou 2-4, Lamia 35100, Greece)

Abstract

This study addresses the issue of threshold effects between general government debt and economic growth in Greece over the period 1970–2016. Using threshold models, there is evidence in favour of a negative association between general government debt and economic growth. The results indicate that the magnitude of this negative relationship between debt and growth depends on debt regimes. Also, the results seem to suggest that public debt might be associated with lower growth at low and moderate public debt levels. Specifically, at debt levels lower than 23.5 percent of GDP, increases in the general government debt-to-GDP ratio are associated with higher negative effect on economic growth, than at very high debt levels of 109.4 percent of GDP. The overall results could explain why general government debt was a significant drag on economic growth of Greece and that the crisis is far from over as thresholds are still binding.

Suggested Citation

  • Pegkas Panagiotis, 2019. "Government Debt and Economic Growth. A Threshold Analysis for Greece," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 25(1), pages 1-6, February.
    • Handle: RePEc:bpj:pepspp:v:25:y:2019:i:1:p:6:n:1
    DOI: 10.1515/peps-2018-0003
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    References listed on IDEAS

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    Cited by:

    1. Panagiotis Pegkas & Christos Staikouras & Constantinos Tsamadias, 2020. "On the determinants of economic growth: Empirical evidence from the Eurozone countries," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 23(2), pages 210-229, June.
    2. Ahmed MAAROUFI & Ghazi BOULILA, 2021. "Non-linear effect of public debt on economic growth: The case of Tunisia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(629), W), pages 121-134, Winter.
    3. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.

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    More about this item

    Keywords

    government debt; economic growth; Greece;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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