Nonlinear Impacts of Public Debt on Economic Growth: A Dynamic Panel Threshold Approach (in Persian)

Roohollah Zare (zare@biau.ac.ir)
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Roohollah Zare: Assistant Professor, Department of Economics, Islamic Azad University, Beyza Branch, Iran.

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2020, vol. 24, issue 4, 43-56

Abstract: This paper investigates the nonlinear impacts of public debt on economic growth by employing a dynamic panel threshold model. Empirical results for the period 2000-2017 indicate that the threshold level of debt to GDP ratio is about 94 percent for 34 high-income countries. The empirical findings also indicate that the debt ratio has a significantly negative impact on economic growth before and after the estimated threshold level, with a much stronger impact after the estimated threshold level. In other words, the regime of the impact of debt on economic growth has changed when the debt ratio has exceeded the 94% threshold level, and since then the increase in debt has had a more negative effect on economic growth. So, one percent increase in the debt ratio in the low debt ratio regime has led to a decrease of 1.018 percent in economic growth, and in the high debt ratio regime has caused a decrease of 4.265 percent in economic growth.

Keywords: Debt Ratio; Economic Growth; Nonlinear Impacts; Dynamic Panel Threshold; High-Income Countries. (search for similar items in EconPapers)
JEL-codes: C23 H63 O40 (search for similar items in EconPapers)
Date: 2020
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