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Total public debt and growth in developing countries

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  • Andrea Filippo Presbitero

    ()
    (Universit… Politecnica delle Marche, MoFiR)

Abstract

The global crisis and the expansionary government reaction in many countries has revamped the attention of policy makers and academics on the growth effects of large public debts. Recent empirical studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.

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Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 44.

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Length: 23
Date of creation: Oct 2010
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Handle: RePEc:anc:wmofir:44

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Keywords: domestic debt; growth; public debt;

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Cited by:
  1. Ugo Panizza & Andrea Filippo Presbitero, 2012. "Public Debt and Economic Growth: Is There a Causal Effect?," Mo.Fi.R. Working Papers 65, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Ugo Panizza & Andrea Filippo Presbitero, 2013. "Public Debt and Economic Growth in Advanced Economies: A Survey," Mo.Fi.R. Working Papers 78, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Markus Eberhardt, 2013. "Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing," Discussion Papers 2013/06, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  4. Markus Eberhardt & Andrea F. Presbitero, 2013. "This Time They’re Different: Heterogeneity and Nonlinearity in the Relationship between Debt and Growth," Discussion Papers 2013/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  5. Hadhek Zouhaier & Mrad Fatma, 2014. "Debt and Economic Growth," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 440-448.
  6. Danny Cassimon & Marin Ferry & Marc Raffinot & Bjorn Van Campenhout, 2013. "Dynamic fiscal impact of the debt relief initiatives on african heavily indebted poor countries (HIPCs)," Working Papers DT/2013/01, DIAL (Développement, Institutions et Mondialisation).
  7. Salvatore Dell’Erba & Ricardo Hausmann & Ugo Panizza, 2013. "Debt levels, debt composition, and sovereign spreads in emerging and advanced economies," Oxford Review of Economic Policy, Oxford University Press, vol. 29(3), pages 518-547, AUTUMN.
  8. Ion Lucian Catrina, 2011. "Long-Run Implications of Public Debt on Economic Growth," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 2(2), pages 83-91, June.
  9. Bua, Giovanna & Pradelli, Juan & Presbitero, Andrea F., 2014. "Domestic public debt in low-income countries : trends and structure," Policy Research Working Paper Series 6777, The World Bank.
  10. Megersa, kelbesa, 2014. "The laffer curve and the debt-growth link in low-income Sub-Saharan African economies," MPRA Paper 54362, University Library of Munich, Germany.
  11. Van Campenhout, Bjorn & Raffinot, Marc & Ferry, Marin & Cassimon, Danny, 2013. "Dynamic Fiscal Impact of The Debt Relief Initiatives on African Highly Indebted Poor Countries (HIPCs)," Economics Papers from University Paris Dauphine 123456789/10905, Paris Dauphine University.
  12. Balatoni, András & Tóth G., Csaba, 2012. "Az új magyar adósságszabály értékelése
    [Assessment of the new regulations on debt]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1107-1137.

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