Economic Consequences of High Public Debt: Evidence from Three Large Scale DSGE Models

Burriel, Pablo; Checherita‐Westphal, Cristina; Jacquinot, Pascal; Schonlau, Matthias; Stähler, Nikolai

doi:10.2139/ssrn.3676264

Cited by 27 publications

(20 citation statements)

References 34 publications

(75 reference statements)

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“…Our findings support the social causation hypothesis [ 24 ] by showing that both lower individual income as well as a generally increased federal government debt contributed to increased psychological distress over 12 months of the pandemic in Germany. This is also consistent with some previous studies suggesting that high government debt can hamper growth, and that countries with high government debt are vulnerable to adverse shocks [ 16 , 22 , 34 ]. On the other hand, an increase in government debt can stimulate economic growth via the resultant employment generation and through productive investment [ 21 ].…”

Section: Discussionsupporting

confidence: 92%

“…On the one hand, rising government debt is a good way to obtain extra funds to invest in economic growth and productive employment in the short run [ 21 ]. On the other hand, unsustainable government debt accrued during the COVID-19 pandemic may raise interest rates and lower national income, which can lead to a fiscal crisis in the medium/long run [ 22 ]. In addition to debt, one study explored the initial impact of the pandemic on economic wellbeing, and found that about 20% of respondents were financially fragile [ 23 ].…”

Section: Introductionmentioning

confidence: 99%

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Long-Term Impact of Economic Downturn and Loneliness on Psychological Distress: Triple Crises of COVID-19 Pandemic

Liu

Haucke

Heinzel

et al. 2021

JCM

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Background: The COVID-19 crisis poses global mental health and global economy challenges. However, there is a lack of longitudinal research investigating whether financial instability and social disruption may increase the risk of developing mental health problems over time that may potentially outlast the pandemic. Methods: We conducted an online survey for members of the general population (n = 2703) in Germany during the twelve months spanning from April 2020 to March 2021. We investigated the development of COVID-19 related psychological distress, the number of unemployed people, federal government debt, income distribution, and loneliness over the time period. Results: Over a period of twelve months, 53.6% of respondents in Germany reported experiencing psychological distress, varying from mild levels, 34.2%, to severe levels, 19.4%, of distress. High federal government debt, high incident COVID-19 cases, low incomes, and the prevalence of loneliness were found to be associated with increased long-term mental health problems. Psychological distress scores were most strongly increased in female and young respondents as well as those who reported fewer years of education, low income, and higher loneliness. Conclusions: Our study highlights factors that have a long-term impact on mental health amid the COVID-19 pandemic. We suggest that specific mental-health services could be offered to support high-risk groups experiencing financial fragility and loneliness. For purposes of safeguarding their mental health there is a need to monitor and track such risk factors in real time.

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Section: Discussionsupporting

confidence: 92%

Section: Introductionmentioning

confidence: 99%

Long-Term Impact of Economic Downturn and Loneliness on Psychological Distress: Triple Crises of COVID-19 Pandemic

Liu

Haucke

Heinzel

et al. 2021

JCM

View full text Add to dashboard Cite

show abstract

“…The first (Eurostat, 2020b). As stipulated by the European Central Bank, countries with high levels of public debt are more vulnerable to the economic consequences of a crisis (Burriel, Checherita-Westphal, Jacquinot, Schon, & Staḧler, 2020).…”

Section: Preparedness For the Pandemicmentioning

confidence: 99%

Patterns of Democracy Matter in the COVID-19 Crisis

Bandelow¹,

Hassenteufel²,

Hornung³

2021

irpp

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“…High indebtedness can affect output on long-term, due to the rise in sovereign spreads and sovereign yields, financial intermediation and increase in future distortionary taxation (Burriel et al, 2020).…”

Section: Theoretical Considerations Regarding Economic Growth and Public Debt Sustainabilitymentioning

confidence: 99%

Public Debt and Economic Growth in Euro Area Countries. A Wavelet Approach

Albu

2021

Technological and Economic Development of Economy

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In this paper we propose to analyze the dynamic of the relation between public debt and economic growth rate for Euro area countries by employing a wavelet approach, establishing thus both short-term and long-term correlations between these two variables. In this way we will present time-frequency dependencies between debt and economic growth and differentiate between short term and long-term effects. High levels of public debt have a negative impact on the economic output, because they entail concerns about debt sustainability. Non-linear analysis of the debt-growth nexus shows the existence of thresholds from which rising indebtedness can hamper economic growth. Using wavelet analysis, we demonstrate that there is a strong relation between public debt and economic growth, especially for high frequencies, public debt having a significant impact on economic growth in case of periods situated above 2 years for most Euro Zone member states. High debt levels can cause serious effects on fiscal stability and therefore require fiscal consolidation in order to restore economic growth. Therefore, Euro Zone member states should implement prudent debt policies and establish clear limits for debt increase, in order to comply with fiscal sustainability and ensure conditions for preserving economic growth.

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Economic Consequences of High Public Debt: Evidence from Three Large Scale DSGE Models

Cited by 27 publications

References 34 publications

Long-Term Impact of Economic Downturn and Loneliness on Psychological Distress: Triple Crises of COVID-19 Pandemic

Long-Term Impact of Economic Downturn and Loneliness on Psychological Distress: Triple Crises of COVID-19 Pandemic

Patterns of Democracy Matter in the COVID-19 Crisis

Public Debt and Economic Growth in Euro Area Countries. A Wavelet Approach

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