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This Time They're Different: Heterogeneity;and Nonlinearity in the Relationship;between Debt and Growth

  • Markus Eberhardt

    ()

    (School of Economics, University of Nottingham, UK, Centre for the Study of African Economies, Department of Economics, University of Oxford, UK)

  • Andrea Filippo Presbitero

    ()

    (International Monetary Fund, Universit… Politecnica delle Marche - MoFiR)

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 modelling 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 a common debt threshold within countries over time.

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Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 92.

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Length: 63
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:anc:wmofir:92
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