Leveraging interest-growth differentials: hidden effects of government financial assets in the European Union

Purpose Given that government financial assets represent a large proportion of gross debt accumulation, this study examines their impact on debt leveraging and potential returns on the gap between interest rates and economic growth (r-g). Design/methodology/approach This research focuses on the co-movements of r-g differentials, government financial assets and the primary deficit through a channel of gross debt, investment, external balance and ratings, using a sample of 27 European Union econom