PANIZZA Ugo e Andrea F. PRESBITERO (2012), "Public debt and economic growth: Is there a causal effect?", Working paper POLIS - Economic Series n. 198 .
Codici J.E.L: F33, F34, F35, O11
Parole chiave: Government Debt, Growth, OECD countries

Abstract
This paper uses an instrumental variable approach to study whether public debt has a causal effect on economic growth in a sample of OECD countries. The results are consistent with the existing literature that has found a negative correlation between debt and growth. However, the link between debt and growth disappears once we instrument debt with a variable that captures valuation effects brought about by the interaction between foreign currency debt and exchange rate volatility. We conduct a battery of robustness tests and show that our results are not affected by weak instrument problems and are robust to relaxing our exclusion restriction.

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