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Impact of public and private sector external debt on economic growth

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Abstract

We assess the effect of the Portuguese external debt of the private and public sectors on economic growth for the period 1999-2014. We study the channels through which external debt may affect economic growth: demand, supply and external accounts.Regarding aggregate demand, we evaluated private saving, public investment in volume and real GDP per person employed. The external debt of the public sector showed some evidence of having a detrimental influence on private saving, but a favourable effect on public investment in volume. The gross external debt of the private sector positively influenced public investment. Concerning aggregate supply, we analysed the production function per person employed in the private sector. Private external debt positively affected the gross value added in volume per person employed. Public external debt negatively impacted the gross value added in volume per person employed and the total factor productivity. Regarding external accounts, the private external debt affected the primary income account, though it had a low coefficient.

Suggested Citation

  • Jorge Silva, 2018. "Impact of public and private sector external debt on economic growth," Working Papers REM 2018/24, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp0242018
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    References listed on IDEAS

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    1. António Afonso & Ricardo Sousa, 2011. "The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(1), pages 61-82, April.
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    6. António Afonso & Jorge Silva, 2017. "Determinants of nonresident government debt ownership," Applied Economics Letters, Taylor & Francis Journals, vol. 24(2), pages 107-112, January.
    7. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
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    Cited by:

    1. Adewale Hassan & Daniel Meyer, 2021. "Exploring the Channels of Transmission between External Debt and Economic Growth: Evidence from Sub-Saharan African Countries," Economies, MDPI, vol. 9(2), pages 1-16, April.

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    More about this item

    Keywords

    external debt; economic growth; public sector; private sector; Portugal;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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