A Study on the Relationship between Government Debt and Economic Growth for Euro Countries

• Main Authors: LIN, HSIN-YING, 林欣螢
• Other Authors: WENG, MING-JANG
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/58h746

碩士 === 國立高雄大學 === 應用經濟學系碩士班 === 107 === According to the relevant literature, the linear relationship between debt ratio and economic growth has crowding, stimulation and non-correlation effect proposed by Friedman (1977), Eisner (1995) and Barro (1989). Debt Laffer Curve is nonlinear relation between debt ratio and economic growth proposed by Claessens (1990) et al. It presents an inverted U-shaped relationship. In this paper, the sample is 19 Eurozone countries. Except Malta, the rest of the sample period uses the quarterly data from 1999 to 2017 to study the relationship between debt ratio and other explanatory variables on the real GDP growth rate.We use linear test to examine whether countries apply the nonlinear smooth transition regression model(STR) proposed by Granger and Teräsvirta (1993) or not. If it is a linear model, we use the Johensan co-integration test to confirm whether there is a long-term relationship between the model variables. The results show that Estonia, Ireland, Luxembourg, Portugal, Slovakia and Spain apply STR model, Austria applies simple regression, and Belgium, Cyprus, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Malta , Netherlands and Slovenia, the above 12 countries apply the vector error correction model (VECM). In the STR model of the 6 countries, with the increase of the debt ratio, the marginal effect of the lagged one period real GDP per capita growth rate on the current period real GDP per capita growth rate is decreasing. The marginal effect of the unemployment rate on the real GDP per capita growth rate is negative, and influence is gradually weakened. The coefficient of inflation rate is mostly negative, and influence is gradually enhanced. In the linear regression of the 13 countries, the marginal effects of the real effective exchange rate and debt ratio on the real GDP per capita growth rate are mostly significantly positively, supporting the stimulus effect of debt and economic growth proposed by Eisner (1995). The marginal effect of unemployment rate and inflation rate on the real GDP per capital growth rate is mostly negative. In this paper, Okuns law (1962), the negative offset relationship between unemployment rate and economic growth rate, is confirmed. The marginal effect of corporate tax on the real GDP per capita growth rate is mostly positive.