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Public debt and growth: Heterogeneity and non-linearity

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  • Eberhardt, Markus
  • Presbitero, Andrea F.

Abstract

We study the long-run relationship between public debt and growth in a large panel of countries. Our analysis builds on theoretical arguments and data considerations in modelling the debt–growth relationship as heterogeneous across countries. We investigate the debt–growth nexus adopting linear and non-linear specifications, employing novel methods and diagnostics from the time-series literature adapted for use in the panel. We find some support for a negative relationship between public debt and long-run growth across countries, but no evidence for a similar, let alone common, debt threshold within countries.

Suggested Citation

  • Eberhardt, Markus & Presbitero, Andrea F., 2015. "Public debt and growth: Heterogeneity and non-linearity," Journal of International Economics, Elsevier, vol. 97(1), pages 45-58.
  • Handle: RePEc:eee:inecon:v:97:y:2015:i:1:p:45-58
    DOI: 10.1016/j.jinteco.2015.04.005
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    More about this item

    Keywords

    Economic growth; Public debt; Common factor model; Non-linearity;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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