ECB paper studies sovereign debt and growth links

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A working paper, published by the European Central Bank in July, examines the link between rising sovereign debt and GDP growth, suggesting there are different effects for different levels of debt.

Authors Anja Baum, Cristina Checherita-Westphal, and Philipp Rother, use data from 12 eurozone countries from 1990–2010 to analyse the impact of rising debt on growth. The paper finds increased government spending up to a debt-to-GDP ratio of 67% is beneficial to short-run growth, but further spending

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