Total Public Debt and Growth in Developing Countries
Andrea Presbitero ()
No 300, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano
The global crisis and the expansionary government reaction in many countries has revamped the at-tention of policy makers and academics on the growth effects of large public debts. Recent empiri-cal studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.
Keywords: Domestic debt; Public debt; growth (search for similar items in EconPapers)
JEL-codes: F33 F34 F35 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-fdg
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Journal Article: Total Public Debt and Growth in Developing Countries (2012)
Working Paper: Total public debt and growth in developing countries (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:csl:devewp:300
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