Public debt, economic growth and nonlinear effects: Myth or reality?

Balázs Égert

No wp1042, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper puts the Reinhart-Rogoff dataset to a formal econometric testing to see whether public debt has a negative nonlinear effect on growth if public debt exceeds 90% of GDP. Using nonlinear threshold models, we show that the negative nonlinear relationship between debt and growth is very sensitive to modelling choices. We also show that when nonlinearity is detected, the negative nonlinear effect kicks in at much lower levels of public debt (between 20% and 60% of GDP). These results, based on bivariate regressions on secular time series, are confirmed on a shorter dataset (1960-2010) using a multivariate growth framework.

Keywords: public debt; economic growth; nonlinearity; threshold effects (search for similar items in EconPapers)
JEL-codes: E6 F3 F4 N4 (search for similar items in EconPapers)
Pages: pages
Date: 2013-02-01
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Public debt, economic growth and nonlinear effects: Myth or reality? (2015)
Working Paper: Public debt, economic growth and nonlinear effects: Myth or reality? (2015)
Working Paper: Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality (2013)
Working Paper: Public debt, economic growth and nonlinear effects: Myth or reality? (2012)
Working Paper: Public debt, economic growth and nonlinear effects: Myth or reality? (2012)
Working Paper: Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality? (2012)
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