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This Time They Are Different: Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth

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  • Markus Eberhardt
  • Andrea Presbitero

Abstract

We study the long-run relationship between public debt and growth in a large panel of countries. Our analysis takes particular note of theoretical arguments and data considerations in modeling the debt-growth relationship as heterogeneous across countries. We investigate the issue of nonlinearities (debt thresholds) in both the cross-country and within-country dimensions, employing novel methods and diagnostics from the time-series literature adapted for use in the panel. We find some support for a nonlinear relationship between debt and long-run growth across countries, but no evidence for common debt thresholds within countries over time.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/248.

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Length: 55
Date of creation: 17 Dec 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/248

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Keywords: Public debt; Economic growth; Economic models; common factor model; nonlinearity; asymmetric ARDL; debt stock; debt terms; debt threshold; debt burden; external debt; debt thresholds; debt accumulation; government debt; debt overhangs; debt sustainability; debt crises; reserve bank; debt reduction; debt data; sovereign debt; debt stock variable; stock of debt; debt stocks; total debt stock; debt relief; terms of debt; foreign aid; sovereign debt crises; debt problems; international lending; external public debt; debt ratio; net present value of debt; currency debt; foreign currency debt; debt intolerance; private credit;

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  1. Il n’y a pas de seuil magique dans la relation entre croissance et endettement
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Cited by:
  1. 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.
  2. Alexander Chudik & Kamiar Mohaddes & M. Hashem Pesaran & Mehdi Raissi, 2013. "Debt, Inflation and Growth - Robust Estimation of Long-Run Effects in Dynamic Panel Data Models," CESifo Working Paper Series 4508, CESifo Group Munich.
  3. Sequeira, Tiago & Santos, Marcelo & Ferreira-Lopes, Alexandra, 2014. "Income Inequality, TFP, and Human Capital," MPRA Paper 55471, University Library of Munich, Germany.

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