Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities

Alexandru Minea and Antoine Parent

No 201218, Working Papers from CERDI

Abstract: 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.

Keywords: Public debt; Economic growth; Nonlinear effects; Cliometrics (search for similar items in EconPapers)
JEL-codes: E62 H63 N10 (search for similar items in EconPapers)
Pages: 23
Date: 2012
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (101)

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Related works:
Working Paper: Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities (2012)
Working Paper: Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities (2012)
Working Paper: Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities (2012)
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