Public Debt and Growth: An Assessment of Key Findings on Causality and Thresholds

Michael Ash (), Deepankar Basu () and Arindrajit Dube
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Michael Ash: Department of Economics and School of Public Policy, University of Massachusetts Amherst
Deepankar Basu: Department of Economics, University of Massachusetts, Amherst

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: We provide a comprehensive assessment of the relationship between public debt and GDP growth in the postwar advanced economies. We use the timing of changes in public debt and growth to account for endogeneity, and find little evidence of a negative relationship. Semi-parametric estimates do not indicate any threshold effects. Finally, we reconcile our results with four recent, influential papers that found a substantial negative relationship, especially when public debt exceeds 90 percent of GDP. These earlier results appear to derive mostly from peculiar parametric specifications of nonlinearities, or use of small samples which amplify the influence of outliers.

Keywords: public debt; growth (search for similar items in EconPapers)
JEL-codes: C82 E00 E6 H6 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (6)

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