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Public debt - economic growth nexus in emerging and developing economies: Exploring nonlinearity

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  • Augustine, Blessy
  • Rafi, O.P.C. Muhammed

Abstract

This paper explores the nonlinear dynamics between public debt and economic growth by estimating the threshold level of debt for thirty-nine emerging and developing economies. The study found a considerable variation amongst the debt thresholds in these countries, ranging between 24 and 132 per cent. We observed the evidence for an inverted U-shape relationship either partially or fully only in six countries. On the contrary, our study found that expanding debt even beyond the threshold promotes economic growth in some countries, while debt hinders growth even at low debt levels in a few countries.

Suggested Citation

  • Augustine, Blessy & Rafi, O.P.C. Muhammed, 2023. "Public debt - economic growth nexus in emerging and developing economies: Exploring nonlinearity," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007164
    DOI: 10.1016/j.frl.2022.103540
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    References listed on IDEAS

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    More about this item

    Keywords

    Public debt; Economic growth; Nonlinearity; Threshold;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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