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Does Government Debt Promote Economic Growth? An Empirical Analysis with Structural Breaks for the Economy of China

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  • Stylianou Tasos

    (University of Macedonia, Department of Applied Informatics)

Abstract

This paper investigates the relationship between economic growth and government debt for one of the biggest economies in the world, the economy of China. The data were fitted into a regression equation using econometric techniques such as unit root tests and Granger causality. Regarding unit root tests we are using three kind of tests: i) The conventional unit tests, which do not take into account structural breaks, ii) the unit root tests that take into account one structural break and iii) tests that take into account multiple structural breaks. The analysis is based on data over the period 1984 to 2011 for China. The results reveal that there are structural breaks in the economy of China but no Granger causality between the variables.

Suggested Citation

  • Stylianou Tasos, 2012. "Does Government Debt Promote Economic Growth? An Empirical Analysis with Structural Breaks for the Economy of China," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 229-248, December.
    • Handle: RePEc:rej:journl:v:15:y:2012:i:46:p:229-248
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    More about this item

    Keywords

    Economic growth; Government Debt; Unit Root tests; Structural Breaks; Bai Perron Test; Granger causality;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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