Public debt, economic growth and nonlinear effects: Myth or reality?
AbstractThis paper puts the Reinhart-Rogoff dataset to a formal econometric testing to see whether public debt has a negative nonlinear effect on growth if public debt exceeds 90% of GDP. Using nonlinear threshold models, we show that the negative nonlinear relationship between debt and growth is very sensitive to modelling choices. We also show that when nonlinearity is detected, the negative nonlinear effect kicks in at much lower levels of public debt (between 20% and 60% of GDP). These results, based on bivariate regressions on secular time series, are confirmed on a shorter dataset (1960-2010) using a multivariate growth framework.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1042.
Date of creation: 15 Feb 2013
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public debt; economic growth; nonlinearity; threshold effects;
Other versions of this item:
- Balazs Egert, 2013. "Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality," CESifo Working Paper Series 4157, CESifo Group Munich.
- Balázs Égert, 2012. "Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality?," OECD Economics Department Working Papers 993, OECD Publishing.
- Balázs Égert, 2012. "Public debt, economic growth and nonlinear effects: Myth or reality?," EconomiX Working Papers 2012-44, University of Paris West - Nanterre la Défense, EconomiX.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-23 (All new papers)
- NEP-FDG-2013-08-23 (Financial Development & Growth)
- NEP-MAC-2013-08-23 (Macroeconomics)
- NEP-PBE-2013-08-23 (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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