Matthijs Lof & Tuomas Malinen v raziskavi Determinants of the growth and sovereign debt correlation s pomočjo VAR analize ocenjujeta korelacijo in vzročnost med rastjo in javnim dolgom. Natančneje, preučujeta ali visok javni dolg povzroča nižjo gospodarsko rast ali obratno in prideta do sklepa, da raziskovalci mešajo vzročnost med obema s korelacijo. Ugotovita, da gre vzročnost v nasprotni smeri, in sicer da, medtem ko povečanje dolga nima značilnega vpliva na gospodarsko rast, pa ima povečanje gospodarske rasti negativen vpliv na javni dolg. Po domače rečeno, višja gospodarska rast povzroči zmanjšanje javnega dolga glede na BDP.

Še ena več v  novi seriji študij, ki so zabile žebelj v krsto enega izmed dveh največjih nategov v sodobni empirični makroekonomiji (raziskava Reinhartove in Rogoffa (2010), ki so jo kasneje razkrinkali kot gnilo jajce).

Since the outbreak of the financial crisis, the relationship between debt and growth has been an issue of heated debate among both academics and policymakers. Reinhart and Rogoff (2010a) showed a negative correlation between sovereign debt and economic growth, and argued that countries could be confronted with a considerable decline in their growth potential after the debt-to-GDP ratio exceeds 90%.

While the research by Reinhart and Rogoff had a substantial influence in policy circles, their results are controversial. Last year, researchers from the University of Massachusets Amherst revealed a number of computational errors in the calculations by Reinhart and Rogoff (Herndon et al. 2013). After correcting the errors, Herndon et al. disputed the existence of a 90% threshold in the relationship between debt and growth. They did, however, still find a negative (albeit weaker) negative correlation between debt and growth.

Even if a negative correlation between debt and growth seems undisputed, this does not imply that debt is harmful for growth, since correlation does not always imply causation. In fact, Reinhart and Rogoff (2010b) have emphasised the possible bi-directional causality between debt and growth. They argue that high debt may lead to higher taxes and/or lower government expenditure, which is harmful for economic growth, while on the other hand periods of low growth may lead to high deficits and accumulation of debt. Nevertheless, these hypotheses are not backed by a quantitative analysis to establish the relative size and significance of each direction. To decompose the correlation into cause and effect, we apply Vector Autoregressive (VAR) models. Our main result is that debt does not seem to have any significant impact on growth.

We estimate a VAR for sovereign debt and GDP growth on panel data for 20 OECD countries over a period of 55 years, which we obtain from the dataset of Reinhart and Rogoff (2009). Detailed descriptions of the data and model can be found in our recent article (Lof and Malinen 2014).

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The main result is in the top-right panel:

• A positive shock to debt (i.e. an increase in debt) seems to have no negative impact on GDP. The point estimate of the impact is in fact even positive, but the confidence interval is so wide that the effect is not significant.
• On the other hand, the bottom-left panel shows that a positive shock to GDP does have a significant negative impact on debt, which explains the negative correlation between debt and GDP.

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Based on a simple VAR analysis with panel data, we can conclude that there is little evidence for a negative long-run effect of sovereign debt on economic growth. Our findings are consistent with recent studies applying different methods, such as Panizza and Presbitero (2013), as well as Kimball and Wang (2013) who “could not find even a shred of evidence in the Reinhart and Rogoff data for a negative effect of government debt on growth”.

Using the negative correlation between debt and growth as a justification for austerity policies could be another example of confusing correlation with causation. While high levels of sovereign debt may surely be a burden for a country, the claim that debt is harmful for growth is not supported by our results.

Vir: Matthijs Lof & Tuomas Malinen, Vox