Working Paper

Private Debt and GDP: A Short-Run Perspective

Gianluca Cafiso
CESifo, Munich, 2016

CESifo Working Paper No. 6201

Mainstream economic research regards private debt as a determinant of GDP growth in the longrun. Levine (2005) surveys in details this branch of literature and explains the channels by which debt fuels growth. In this paper we switch the focus from the long to the short-run and study whether private debt has a significant impact on GDP growth in the short-run too. Our aim is to understand whether policy measures aimed to reduce the cost of private debt may favor a quick increase of the economic activity.

CESifo Category
Fiscal Policy, Macroeconomics and Growth
Monetary Policy and International Finance
Keywords: private debt, GDP, short-run, VAR
JEL Classification: O110, O160, O510, O520, E440