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Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing

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  • Markus Eberhardt

Abstract

This paper employs novel time series methods to investigate the presence of nonlinearities in the long-run relationship between public debt and growth, analysing annual series for the United States, Great Britain, Japan and Sweden from the 1800s to 2008. We find only limited evidence for a nonlinear long-run relationship in these countries and further cannot support the notion that the equilibrium debt-growth relationship is identical across countries. Both results weaken the case for a common 90% or indeed any common debt/GDP threshold recently popularised by the work of Reinhart and Rogoff (2010) and others.

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  • 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).
    • Handle: RePEc:not:notcfc:13/06
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    Cited by:

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    3. Kummer-Noormamode, Sabina, 2018. "The Relationship between Public Debt and Economic Growth: Nonlinearity and Country-Specificity," MPRA Paper 98075, University Library of Munich, Germany.
    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).

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    Keywords

    economic growth; public debt; nonlinearity; summability; balance and co-summability;
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