Role of debt in emerging economies: a re-examination of the debt-growth nexus

Subaran Roy and Chitrakalpa Sen

Macroeconomics and Finance in Emerging Market Economies, 2024, vol. 17, issue 2, 227-248

Abstract: Traditionally, a higher debt burden is expected to negatively affect the economic growth, although the empirical evidence is inconclusive. In this paper we have re-examined the debt-growth relationship for 32 emerging economies while considering possible nonlinear impact of debt on economic growth using a dynamic panel. Our results suggest that for emerging economics, a large debt if used efficiently, can lead to significant positive economic growth. This relationship remains unchanged even when we control for other macroeconomic variables. We have also identified three different threshold debt-GDP ratios for the one, two and three period lags of debt and found an asymmetric impact of debt between above-threshold and below-threshold countries.

Date: 2024
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DOI: 10.1080/17520843.2022.2028381

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