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Total public debt and growth in developing countries

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  • Andrea Filippo Presbitero

    () (Universit… Politecnica delle Marche, MoFiR)

Abstract

The global crisis and the expansionary government reaction in many countries has revamped the attention of policy makers and academics on the growth effects of large public debts. Recent empirical studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.

Suggested Citation

  • Andrea Filippo Presbitero, 2010. "Total public debt and growth in developing countries," Mo.Fi.R. Working Papers 44, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:44
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    Cited by:

    1. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2015. "“On the bi-directional causal relationship between public debt and economic growth in EMU countries”," IREA Working Papers 201512, University of Barcelona, Research Institute of Applied Economics, revised May 2015.
    2. repec:lje:journl:v:19:y:2015:i:1:p:71-103 is not listed on IDEAS
    3. Panizza, Ugo & Presbitero, Andrea F., 2014. "Public debt and economic growth: Is there a causal effect?," Journal of Macroeconomics, Elsevier, pages 21-41.
    4. Markus Eberhardt & Andrea F. Presbitero, 2013. "This Time They’re Different: Heterogeneity and Nonlinearity in the Relationship between Debt and Growth," Discussion Papers 2013/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    5. Kelbesa Megersa & Danny Cassimon, 2015. "Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?," Public Administration & Development, Blackwell Publishing, vol. 35(5), pages 329-346, December.
    6. Matteo Migheli & Guido Ortona & Ferruccio Ponzano, 2014. "Competition among parties and power: an empirical analysis," Annals of Operations Research, Springer, pages 201-214.
    7. Danny Cassimon & Marin Ferry & Marc Raffinot & Bjorn Van Campenhout, 2013. "Dynamic fiscal impact of the debt relief initiatives on african heavily indebted poor countries (HIPCs)," Working Papers DT/2013/01, DIAL (Développement, Institutions et Mondialisation).
    8. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2015. "“Short-run and long-run effects of public debt on economic performance: Evidence from EMU countries”," IREA Working Papers 201522, University of Barcelona, Research Institute of Applied Economics, revised Sep 2015.
    9. Salvatore Dell’Erba & Ricardo Hausmann & Ugo Panizza, 2013. "Debt levels, debt composition, and sovereign spreads in emerging and advanced economies," Oxford Review of Economic Policy, Oxford University Press, pages 518-547.
    10. Panizza, Ugo & Presbitero, Andrea F., 2014. "Public debt and economic growth: Is there a causal effect?," Journal of Macroeconomics, Elsevier, pages 21-41.
    11. Ion Lucian Catrina, 2011. "Long-Run Implications of Public Debt on Economic Growth," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, pages 83-91.
    12. Giovanna Bua & Juan Pradelli & Andrea Filippo Presbitero, 2013. "Domestic public debt in low-income countries: trends and structure," Mo.Fi.R. Working Papers 85, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    13. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2017. "Heterogeneity in the debt-growth nexus: Evidence from EMU countries," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 470-486.
    14. Sadia Shabbir & Hafiz M. Yasin, 2015. "Implications of Public External Debt for Social Spending: A Case Study of Selected Asian Developing Countries," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(1), pages 71-103, Jan-June.
    15. Cândida Ferreira, 2014. "Debt and economic growth in the European Union: what causes what?," Working Papers Department of Economics 2014/08, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    16. repec:dau:papers:123456789/10905 is not listed on IDEAS
    17. Ugo Panizza & Andrea F. Presbitero, 2013. "Public Debt and Economic Growth in Advanced Economies: A Survey," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), pages 175-204.
    18. Balatoni, András & Tóth G., Csaba, 2012. "Az új magyar adósságszabály értékelése
      [Assessment of the new regulations on debt]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1107-1137.
    19. Markus Eberhardt, 2013. "Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing," Discussion Papers 2013/06, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    20. Cândida Ferreira, 2016. "Debt and Economic Growth in the European Union: A Panel Granger Causality Approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, pages 131-149.
    21. Kelbesa Abdisa Megersa, 2015. "The laffer curve and the debt-growth link in low-income Sub-Saharan African economies," Journal of Economic Studies, Emerald Group Publishing, vol. 42(5), pages 878-892, October.
    22. repec:eco:journ1:2014-02-19 is not listed on IDEAS
    23. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2015. "The causal relationship between debt and growth in EMU countries," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 974-989.

    More about this item

    Keywords

    domestic debt; growth; public debt;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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