ABSTRACT
This article uses the DCC-generalized autoregressive conditional heteroskedasticity model to investigate the existence of time-varying correlations between public debt and economic growth. To that end, we use annual data from both central and peripheral countries of the euro area for the period 1961–2015. The results suggest that the relationships between these variables are time-varying and that in some countries and for some periods, there is a positive association between them.
Acknowledgements
Simón Sosvilla-Rivero thanks the Department of Economics for their hospitality during a research visit at the University of Bath.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Cecchetti, Mohanty, and Zampolli (Citation2011) report negative correlations of per capita GDP volatility with government debt.
2 The role of policy volatility can also be detected in Barro (Citation1990).
3 To save space, the estimation results for the DCC-GARCH models are not shown here, but available from the authors upon requests.