Public Debt and Economic Growth Nexus in Latin America: A Retrospective Appraisal

Resumen

In this paper, we examine the effect of public debt on Gross Domestic Product (GDP) in 15 Latin American economies (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela) for the period 1960-2015. The short-run impact of debt on GDP growth is positive, but it is closer to zero beyond public debt-to-GDP ratios between 64% and 71% (i.e. up to this threshold, additional debt has a stimulating impact on growth). In the long run, the threshold is between 95% and 97%.