Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities
In their already-famous 2010 article "Growth-in-a-Time-of-Debt" (AER-100(2)-pp.-573-78), Carmen Reinhart and Kenneth Rogoff show that average post-WW2 economic growth is dramatically declining in advanced economies, once the debt-to-GDP ratio is above a 90% threshold. We explore the relevance of this exogenous threshold using up-to-date econometric techniques, and reveal an endogenously-estimated threshold around a debt-to-GDP ratio of 115%, above which the negative debt-growth link changes sign. Consequently, additional evidence is needed before suggesting policy recommendations regarding growth effects of fiscal policy in such high debt regimes, which may be subject to complex nonlinearities.
|Date of creation:||23 May 2012|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00700471|
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References listed on IDEAS
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- repec:afc:cliome:v:6:y:2012:i:2:p:211-219 is not listed on IDEAS
- Carmen M. Reinhart & Kenneth S. Rogoff, 2010.
"Growth in a Time of Debt,"
NBER Working Papers
15639, National Bureau of Economic Research, Inc.
- González, Andrés & Teräsvirta, Timo & van Dijk, Dick, 2005.
"Panel Smooth Transition Regression Models,"
SSE/EFI Working Paper Series in Economics and Finance
604, Stockholm School of Economics.
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