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This Time They Are Different: Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth

  • Markus Eberhardt
  • Andrea Presbitero

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 modeling 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 common debt thresholds within countries over time.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/248.

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Length: 55
Date of creation: 17 Dec 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/248
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