 Does the debt-growth link differ across private and public debt? Evidence from ChinaYanwei Gu, Jing Guo, Xiao Liang and Yajun Zhao Economic Modelling, 2022, vol. 114, issue C Abstract: Deleveraging has been one of China's announced policy goals since 2015 due to the high debt-to-GDP ratio. Although China's private debt and public debt differ widely in level and usage, the literature overlooks the difference in their impacts on economic growth in China. We fill this research gap by separately investigating the private and public debt-growth link with the Max Share method. Our results show that private debt has inverted U-shaped effects on both investment and TFP, thus growth, which provides new evidence that excessive inflows of capital into real estate and financial assets could crowd out manufacturing investment and hinder innovation. In contrast, public debt still has a positive and linear effect on growth due to the crowding-in effect of public investment on private investment. Finally, this paper suggests focusing more on reducing private debt for China's deleveraging. Keywords: Private debt; Public debt; Economic growth; Debt threshold; Debt-growth channel (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:114:y:2022:i:c:s0264999322001766 DOI: 10.1016/j.econmod.2022.105930 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.