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

Markus Eberhardt

No 2013/06, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

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.

Keywords: economic growth; public debt; nonlinearity; summability, balance and co-summability (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-his and nep-pbe
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:13/06

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