The Relationship Between Public Debt, Economic Growth, and Monetary Policy: Empirical Evidence from Tunisia

Abdelkafi, Inès

doi:10.1007/s13132-016-0404-6

Cited by 31 publications

(10 citation statements)

References 25 publications

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“…The empirical tests of the relations between interest rate and economic growth have been mostly in favour of their negative relation. Authors such as Hossain [4], Low and Chan [5], Abdelkafi [6] and Ozer and Karagol [7] applied various methods specific to time series (Granger causalities, autoregressive models with distributed lag and error correction models) in order to study the influence of monetary policy instruments on economic growth. The study conducted by Hossain over a period of 62 years on the determinants of economic growth in Bangladesh indicated that inflation causes an increase in the interest rate and exchange rate volatility, the latter affecting economic performance [4].…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

“…On the one hand, economic growth can influence the interest rate [13][14][15][16][17] while, on the other hand, the interest rate may influence the economic growth [18][19][20]. Abdelkafi highlighted that there is a bidirectional relation between them, the monetary policies and the economic activity being interdependent [6]. Lee and Werner rejected the canonical theory of the influences that the interest rate may have on economic growth, obtaining for the United States, Germany, UK and Japan reversed Granger causalities and stating that economic growth is a cause factor for the interest rate [21].…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

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The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks

2020

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The role of the interest and exchange rates in sustaining economic growth has been a highly researched subject. Therefore, this study examines the influence of the monetary policy interest rate, the real exchange rate and the business climate in the Euro area on the economic growth in Romania. For this purpose, we have applied a pre-test for structural breaks to identify the existence of structural breaks, followed by the traditional unit root tests and the unit root tests with structural breaks to verify the stationarity of the variables. The results of the Bound cointegration test led to the autoregressive distributed lag (ARDL) short-run model that measures the short-run impact of the interest rate, exchange rate and the business climate in the Euro area on the economic growth of Romania. Our findings show that in the short run, the economic growth is negatively influenced by the interest rate, and positively by the exchange rate. We also indicate that the business climate in the Euro area has mixed effects on the economic growth. Finally, considering the growing interdependence between the internal and external (European) business environment, the results are highly significant for handling the interest and exchange rates in sustaining economic growth.

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Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks

2020

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“…did not take into account the main economic factor in its study. Although, the studies of Abdelkafi [1], Ozer and Karagol [40], Próchniak and Witkowski [47], and Murgia [37] clearly emphasized the significance of the main economic factors (GDP, INR, INF, UM, GD and ER) and the uncertainties (EPU) on stock market trading.…”

Section: Methodsmentioning

confidence: 99%

Economic policy uncertainty and the US stock market trading: non-ARDL evidence

2022

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The present study investigates the impact of economic policy uncertainty, and economic factors on the stock market index in the USA using Non-ARDL and Quantile models. The findings reveal that declining economic and economic-political factors will increase the stock market index in the US. The results indicate that the effect of inflation and GDP variables follows a nonlinear pattern. Similar results using quantitative regression showed asymmetric impacts of inflation and GDP on stock market transactions.

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“…Further, crowding out occurs due to the diminishing effect of public debt on capital-output ratio caused by the unwillingness of people to hold public debt instruments at the prevailing rates, leading to an increase in interest rate (Diamond, 1965). The postulation of a negative effect of public debt on economic growth as argued by the neoclassical theory of debt is supported by evidence such as Apergis and Cooray (2016), Senadza et al (2017), Abdelkafi (2018), McLean and Charles (2018), Nwali and Nkwede (2016) and Ouhibi et al (2017).…”

Section: Introductionmentioning

confidence: 92%

Permanent and transitory effect of public debt on economic growth

Abubakar

Mamman

2020

JES

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PurposeThis study examines the effect of public debt on the economic growth of OECD countries by disentangling the effect into permanent and transitory components. The study covers 37 OECD countries.Design/methodology/approachThe Mundlak decomposition was employed to decompose the effect of public debt into its transitory and permanent effect on economic growth. To account for potential endogeneity problem, the Hausman and Taylor estimator was employed to estimate the decomposed model. Further, the study disaggregated the OECD model into country group models for further analysis of the dynamics of the relationship between the variables.FindingsThe findings of the study reveal that in the full OECD model public debt exerts a significant negative permanent and positive transitory effect on economic growth. This was robust to alternative model specifications. The magnitude of the negative permanent effect of debt was found to be larger than the positive transitory effect. Further, the estimates of the disaggregated models reveal that though public debt has a negative permanent effect across all the country groups, it was not the case for the transitory effect of debt. Also, a net public debt model was estimated, and its effect on public debt was found to be largely insignificant, exhibiting a Ricardian-like behaviour.Originality/valueTo the best of our knowledge, this is the first study, particularly in the OECD context that employed the Mundlak transformation to examine the permanent versus transitory effect of public debt on economic growth.

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The Relationship Between Public Debt, Economic Growth, and Monetary Policy: Empirical Evidence from Tunisia

Cited by 31 publications

References 25 publications

The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks

The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks

Economic policy uncertainty and the US stock market trading: non-ARDL evidence

Permanent and transitory effect of public debt on economic growth

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