Abstract
In the last chapters, we have analyzed endogenous growth models assuming that the government sticks to the intertemporal budget constraint and seen how different debt policies affect economic growth and welfare. In this chapter, we intend to contribute to the empirical research studying the relation between debt and economic growth where we proceed as in Fincke and Greiner (2013).
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Notes
- 1.
See also the critique in Herndon et al. (2014).
- 2.
Earlier studies using time series data for the USA find a growth maximizing debt to GDP ratio of about 40–50 %, cf. Smyth and Hsing (1995) and the literature cited in that paper.
- 3.
However, within a theoretical endogenous growth model, one needs extreme assumptions to get an inverse U-shaped relation between debt and growth (cf. Greiner 2013d).
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Greiner, A., Fincke, B. (2015). Debt and Growth: Empirical Evidence. In: Public Debt, Sustainability and Economic Growth. Springer, Cham. https://doi.org/10.1007/978-3-319-09348-2_6
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DOI: https://doi.org/10.1007/978-3-319-09348-2_6
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