Threshold Effects of Sovereign Debt
AbstractThis paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55â€“56 percent. Moreover, the debt dynamics begin changing well before this threshold is reached. Specifically, at debt levels lower than 30 percent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 percent, the effects on economic growth diminishes rapidly and at debt levels reaching 55-56 percent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, debt becomes a drag on growth.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 12/157.
Date of creation: 01 Jun 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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