Vol. 16 No. 33 (2021)

Artículos

Effect of public investment on Mexico’s public debt, 1981-2019

Published 2021-06-20 — Updated on 2021-06-21

  • Josué Zavaleta González
    • ,
  • Juan Alberto Vázquez Muñoz

Josué Zavaleta González
Facultad de Economía de la Benemérita Universidad Autónoma de Puebla

Juan Alberto Vázquez Muñoz
Facultad de Economía de la Benemérita Universidad Autónoma de Puebla

Abstract

In this paper we analyze, theoretically and empirically, the effect of the public investment as a percentage of the GDP (Sg) on the annual variation of the public debt as a percentage of the (Δd) for the Mexican economy during the 1981-2019 period. In line with the orthodox theory, fiscal policy has been characterized by a low Sg hand in hand with a permanent attempt to achieve fiscal balances to control the public debt as a percentage of the GDP (d). However, in the last decade d has been increasing permanently due to the depressive effect of the fiscal policy on the growth rate. We postulate that in a low growth rate regime with underutilization of productive capacity, an expansive fiscal policy, based on public investment, is required to stimulate the growth rate and consequently to reduce d.

Keywords

Public Debt, Public Investment, Fiscal Deficit, Economic Growth, Mexico

PDF (Spanish)

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