Macroeconomic effects of public debt (by the example of Germany, USA and Japan)

Economic Annals-ХХI: Volume 136, Issue 11-12(2), Pages: 37-40

Citation information:
Danylyuk, V. (2013). Macroeconomic effects of public debt (by the example of Germany, USA and Japan). Economic Annals-XXI, 11-12(2), 37-40. https://ea21journal.world/index.php/ea-v136-10/

Vladyslav Danylyuk
PhD Student,
Institute of the World Economy and International Relations of the
NAS of Ukraine, Kyiv, Ukraine
5 Leontovych St., Kyiv, 01030, Ukraine
vladislav.danilyuk.nas@gmail.com

Macroeconomic effects of public debt (by the example of Germany, USA and Japan)

Abstract. Introduction. The global economic crisis of 2008-2009 led to the problems in the area of public finances in many developed countries. The economies of the United States, Japan and Germany are today in a state of the debt crisis, because public debt in these countries reached enormous volumes. The main objective of the article is to estimate the impact of public debt on key macroeconomic indicators in Germany, USA and Japan. Methods. Estimations are done by creation and empirical evaluation of vector auto-regression models VAR. Assessment results are presented as graphs of functions of impulse responses.

Results. The growth of public debt in Germany, USA and Japan affects the growth rate of real gross domestic product and employment. Article shows that public debt in these countries does not lead to an increase in the rate of consumer prices. The increase of the debt burden on the economy of Germany results in deterioration of the current account of the country. The United States and Japan do not have such macroeconomic effect of public debt. Inflation in Germany, USA and Japan reduces the levels of public debt to GDP ratio.

Conclusion. Reducing the debt burden on the economy is an important task for the governments of the investigated countries. One of the most effective tools to achieve this goal in Germany, USA and Japan may be the implementation of policy measures that support a high level of inflation.

Keywords: National Debt; Real Effective Exchange Rate; Current Account; Vector Error Correction Model VAR/VEC

JEL Classification: E20; E60; E69; F34; H63

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Received 09.10.2013