Public debt is always toxic to economic growth
This paper deals with the debt-growth relationship using several time-series tools. The idea is to find out whether the inverse relationship between these variable can be detected without imposing any functional forms for the estimating relationship and whether the relationship does indeed reflect some nonlinear features. Thus recursive correlations with different orderings of the time-series are computed using the Reinhart and Rogoff panel data. After that, recursive correlations are re-estimated with data that are cyclically adjusted to reflect the structural features of these two variables. The nature of the relationship is also scrutinized by using various variable-parameter estimation techniques (Kalman Filter, Logistic functional form and recursive estimation). Finally, some analyses of causality are carried out using these (filtered) data. The analysis clearly shows that the inverse relationship is very robust indeed and it rather supports the ``toxic debt'' hypothesis than the cyclical debt accumulation hypothesis.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +358 2 333 51
Web page: http://ace-economics.fi
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simone Salotti & Carmine Trecroci, 2012. "Even Worse than You thought: The Impact of Public Debt on Aggregate Investment and Productivity," DEGIT Conference Papers c017_020, DEGIT, Dynamics, Economic Growth, and International Trade.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2010.
"Growth in a Time of Debt,"
American Economic Review,
American Economic Association, vol. 100(2), pages 573-78, May.
- Reinhart, Carmen M. & Rogoff, Kenneth S., 2010. "Growth in a Time of Debt," Scholarly Articles 11129154, Harvard University Department of Economics.
- Reinhart, Carmen M. & Rogoff, Kenneth, 2010. "Growth in a Time of Debt," CEPR Discussion Papers 7661, C.E.P.R. Discussion Papers.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," NBER Working Papers 15639, National Bureau of Economic Research, Inc.
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- Thomas Herndon & Michael Ash & Robert Pollin, 2013. "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff," Working Papers wp322, Political Economy Research Institute, University of Massachusetts at Amherst.
- André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
- James Tobin, 1965. "The Burden Of The Public Debt: A Review Article," Journal of Finance, American Finance Association, vol. 20(4), pages 679-682, December.
When requesting a correction, please mention this item's handle: RePEc:tkk:dpaper:dp88. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aleksandra Maslowska)
If references are entirely missing, you can add them using this form.