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

Authors

  • José Mauricio Gil León Universidad Pedagógica y Tecnológica de Colombia
  • John William Rosso Murillo Universidad Pedagógica y Tecnológica de Colombia
  • Edgar Alonso Ramirez Hernández Universidad de los Andes

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.

Keywords: public debt, economic growth, GDP volatility, macroeconomic stability, current account.

JEL Classifications: E60, E62, H63, O47

DOI: https://doi.org/10.32479/ijefi.8167

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Author Biographies

José Mauricio Gil León, Universidad Pedagógica y Tecnológica de Colombia

Economist, Master in Economics, Assistant Professor.

John William Rosso Murillo, Universidad Pedagógica y Tecnológica de Colombia

Industrial Engineer, PhD in Management. Associate Professor at the Management and Economics Faculty.

Edgar Alonso Ramirez Hernández, Universidad de los Andes

PhD student in economics Departament of Economics, University Los Andes.

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Published

2019-07-17

How to Cite

Gil León, J. M., Rosso Murillo, J. W., & Ramirez Hernández, E. A. (2019). Public Debt and Stability in Economic Growth: Evidence for Latin America. International Journal of Economics and Financial Issues, 9(4), 137–147. Retrieved from https://econjournals.com/index.php/ijefi/article/view/8167

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Articles