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Debt, Growth and the Consumption-Investment Decision: An Empirical Investigation
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper explores the relationship between the use of public debt and real GDP (Gross Domestic Product) growth. The analysis takes into account a vector of growth determinants using an empirical approach developed by Barro [1996]. This paper finds that increases in debt are unrelated to growth but that increases in debt associated with increases in consumption (relative to investment) are negatively associated with growth. The results indicate that a 10% increase in the debt-to-GDP ratio, only if associated with a parallel increase in the consumption-investment ratio, causes a 0.55% decrease in the average annual real GDP growth rate.

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URN: urn:nbn:se:uu:diva-219695OAI: oai:DiVA.org:uu-219695DiVA: diva2:702920
Available from: 2014-03-05 Created: 2014-03-05 Last updated: 2014-03-05Bibliographically approved

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