Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities
AbstractIn their already-famous 2010 article "Growth-in-a-Time-of-Debt" (AER-100(2)-pp.-573-78), Carmen Reinhart and Kenneth Rogoff show that average post-WW2 economic growth is dramatically declining in advanced economies, once the debt-to-GDP ratio is above a 90% threshold. We explore the relevance of this exogenous threshold using up-to-date econometric techniques, and reveal an endogenously-estimated threshold around a debt-to-GDP ratio of 115%, above which the negative debt-growth link changes sign. Consequently, additional evidence is needed before suggesting policy recommendations regarding growth effects of fiscal policy in such high debt regimes, which may be subject to complex nonlinearities.
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Bibliographic InfoPaper provided by CERDI in its series Working Papers with number 201218.
Date of creation: 2012
Date of revision:
public debt; economic growth; nonlinear effects; cliometrics;
Other versions of this item:
- Alexandru Minea & Antoine Parent, 2012. "Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities," Working Papers halshs-00700471, HAL.
- Alexandru Minea & Antoine Parent, 2012. "Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities," Working Papers 12-08, Association Française de Cliométrie (AFC).
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-05 (All new papers)
- NEP-MAC-2012-06-05 (Macroeconomics)
- NEP-PBE-2012-06-05 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Panel Smooth Transition Regression Models,"
Research Paper Series
165, Quantitative Finance Research Centre, University of Technology, Sydney.
- Reinhart, Carmen & Rogoff, Kenneth, 2010.
"Growth in a Time of Debt,"
CEPR Discussion Papers
7661, C.E.P.R. Discussion Papers.
- International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
- 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.
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