Government Debt Reduction in the USA and Greece: A Comparative VECM Analysis


  • Gisele MAH North-West University
  • Itumeleng P. MONGALE University of Limpopo
  • Janine MUKUDDEM-PETERSEN University of Cape Town


Sovereign Debt, Vector Error Correction Model, Granger Causality, Greece, United States of America


The purpose of this paper is to estimate comparative debt reduction models for the USA and Greece using Vector Error Correction Model analysis and Granger causality test. The study provides an empirical framework that could assist in policy formulation for countries with high debt rates as well as those experiencing debt crises. The US model revealed a negative and significant relationship between general government debt and inflation as well as negative significance with primary balance. In Greece, the relationship between general government debts with primary balance is found to be positive and significant while negative and significant with net transfer from abroad. Granger causality is from general government debts to inflation in the USA and from primary balance to general government debts in Greece.



How to Cite

MAH, G., MONGALE, I. P., & MUKUDDEM-PETERSEN, J. (2019). Government Debt Reduction in the USA and Greece: A Comparative VECM Analysis. Eurasian Journal of Business and Economics, 9(18), 99-112. Retrieved from