an empirical investigation of economic growth and debt

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  • University of PiraeusDepartment of Economics

    An empirical investigation of economic growth and debt

    Dimitrios KiritsisDonatela SalaiAntzela Ouroutsi

    Piraeus, June 2015

  • *Outline Motivation Graph Model Data Results Estimated Model Robustness Conclusions / References

  • Motivation

  • Data: Graphs

  • Model Solow (1956), Barro(1991), Checherita & Rother(2012)

    grY= ai+ a1 (Yt=o/popt=o) + a2 (Iit/Yit )+ a3 (grL/Yit )+ a4(Debtit/Yit)+a5 (Debtit/Yit)2+a6Zit + it

    Where, grY= Growth rate of GDP(constant 2005 US$) Iit/Yit= Investment (% of GDP)grL=Growth rate of labor (% of GDP)Debtit/Yit =Central government debt, total (% of GDP)pop=Population, totalZi, i=1,2,1= Net Exports (% of GDP) 2= General government final consumption expenditure (% of GDP) Expectationsa1 (-),a2 (+),a3 (+),a4 (?),a5 (?),a6.1 (+),a6.2 (-)

  • Data Countries : Austria, Canada, Czech Republic, Denmark, Hungary, Jordan, Nepal, Philippines, Sweden

    Time span : 1992/1995-2009

    Source : World Bank Indicator (WDI)

  • Results

  • Estimated Model: POOLED OLSHausman test between Fixed effects model and Random effects resulted in Random effects model.After that, by having the xttest we resulted in OLS default model.

    grY= -15.33-0.05gdpc1+0.17investment1-9.2grL+0.13debt1-0.07DEBT2+0.28nx1-0.44spending1+ it (0.51) (0.32) (1.18) (1.65) (0.46) (0.25) (1.89) 0.31)

    Note: Number in parenthesis are t-valuesDiagnosticsNumber of obs = 165F( 7, 157) = 0.98 Prob > F = 0.4459 R-squared = 0.0420Adj R-squared = -0.0007 Root MSE = 84.294

    Free: Multicolinearity, Hetteroskedasticity, Autocorrelation

  • *RobustnessDummies:D for net exporting countries VS net importing countries.Group A= Net exporters: Hungary, Nepal, Jordan, Philippines, Czech RepublicGroup B= Net importers: Austria, Canada, Denmark, Sweden

    grY= 18.72- 0.12gdpc1+0.05investment1-3.48grL-0.07debt1+0.04DEBT2+0.08nx1-0.08spending1+0.04D+it (1.59) (2.01) (0.99) (1.27) (1.64) (0.47) (1.50) ( 1.84) (0.07)

    Note:Number in parenthesis are t-valuesDiagnosticsNumber of obs = 165F( 8, 150) = 0.74 Prob > F = 0.66 R-squared = 0.0377Adj R-squared = -0.0136 Root MSE = 36,37

    Free: Multicolinearity, Hetteroskedasticity, Autocorrelation

    These countries were chosen and grouped by their net exports. The net export of a country is the value of a its total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy.Group A= Net exporters: Hungary, Nepal, Jordan, Philippines, Czech RepublicGroup B= Net importers: Austria, Canada, Denmark, Sweden

    These countries were chosen and grouped by their net exports. The net export of a country is the value of a its total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy.Group A= Net exporters: Hungary, Nepal, Jordan, Philippines, Czech RepublicGroup B= Net importers: Austria, Canada, Denmark, Sweden

  • *Conclusions

    a7: (Net Exports (% of GDP) positive effect and statistical significant

    Daniel Lederman& William F. Maloney (2003): "Trade Structure and Growth, World Bank Policy Research Working Paper, No. 3025

  • *Appendix1.Multicolinearity

  • *Graph matrix

  • *2.Heteroskedasticity

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    3.Autocorrelation

  • *Histograms

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  • *Box Plots

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  • *Time Series Plots

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  • *Scatter Plots

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  • *OLS regression

  • *OLS ROBUST REGRESSION

  • *FIXED EFFECTS REGRESSION

  • *FIXED EFFECTS ROBUST REGRESSION

  • *RANDOM EFFECTS REGRESSION

  • *RANDOM EFFECTS ROBUST REGRESSION

  • *HAUSMAN TEST

  • *XTTEST

  • *OUTLIERS

  • *MODEL ESTIMATED WITH DUMMIES

  • *MODEL ESTIMATED WITHOUT OUTLIERS

    These countries were chosen and grouped by their net exports. The net export of a country is the value of a its total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy.Group A= Net exporters: Hungary, Nepal, Jordan, Philippines, Czech RepublicGroup B= Net importers: Austria, Canada, Denmark, Sweden

    These countries were chosen and grouped by their net exports. The net export of a country is the value of a its total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy.Group A= Net exporters: Hungary, Nepal, Jordan, Philippines, Czech RepublicGroup B= Net importers: Austria, Canada, Denmark, Sweden

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