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Debt-Growth Nexus in the MENA Region: Evidence from a Panel Threshold Analysis

Author

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  • Mohammed Daher Alshammary

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Zulkefly Abdul Karim

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Norlin Khalid

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Riayati Ahmad

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

Abstract

This study examines whether a debt-to-GDP threshold exists in the public debt and economic growth relationship for 20 Middle East and North Africa (MENA) countries from 1990 to 2016 using the threshold estimation technique. The empirical results reveal that there is a threshold effect in the public debt and economic growth relationship. The MENA region’s debt-to-GDP threshold value as a developing region is lower than the debt threshold computed by earlier studies for developing countries. We found that the effect of public debt on economic growth is significant and positive only below the threshold value of debt-to-GDP. More precisely, debt has a promoting influence on economic growth when the debt is less than 58% of the GDP. This finding indicates that the relationship between public debt and economic growth is contingent on the debt-to-GDP ratio. Importantly, policymakers need to be more prudent when establishing a policy regarding debt issues.

Suggested Citation

  • Mohammed Daher Alshammary & Zulkefly Abdul Karim & Norlin Khalid & Riayati Ahmad, 2020. "Debt-Growth Nexus in the MENA Region: Evidence from a Panel Threshold Analysis," Economies, MDPI, vol. 8(4), pages 1-12, November.
    • Handle: RePEc:gam:jecomi:v:8:y:2020:i:4:p:102-:d:447987
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    References listed on IDEAS

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    3. Eleftherios Giovanis & Oznur Ozdamar, 2022. "The impact of climate change on budget balances and debt in the Middle East and North Africa (MENA) region," Climatic Change, Springer, vol. 172(3), pages 1-27, June.

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