The impact of Government Debt on Economic Growth: An Overview for Latin America

San Petesburgo

Congreso; Second World Congress of Comparative Economics; 2017

European Association for Comparative Economic Studies (EACES)

This paper investigates the impact of government debt on GDP in 16 Latin American economies, namely Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela over a period of about fifty years (1960 2014 ). The short run impact of debt on GDP growth is positive, but decreases to close to zero beyondpublic debt to GDP ratios between 64 and 71% (i.e. up to this threshold, additional debt has a stimulating impact on growth). The institutional variable selected shows the expected sign suggesting that countries with democratic governments exhibit higher growth rates.