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

Author

Listed:
  • Jos Mauricio Gil Le n

    (Department of Economic, Universidad Pedag gica y Tecnol gica de Colombia, Tunja, Colombia)

  • John William Rosso Murillo

    (Department of Business Administration, Universidad Pedag gica y Tecnol gica de Colombia, Tunja, Colombia,)

  • Edgar Alonso Ramirez Hern ndez

    (Departament of Economic, Universidad de Los Andes, Bogot , Colombia)

Abstract

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.

Suggested Citation

  • Jos Mauricio Gil Le n & John William Rosso Murillo & Edgar Alonso Ramirez Hern ndez, 2019. "Public Debt and Stability in Economic Growth: Evidence for Latin America," International Journal of Economics and Financial Issues, Econjournals, vol. 9(4), pages 137-147.
    • Handle: RePEc:eco:journ1:2019-04-16
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    More about this item

    Keywords

    public debt; economic growth; GDP volatility; macroeconomic stability; current account.;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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