Investigating the Threshold Effect of Public Debt on Economic Growth Using Threshold Regression Model: Evidence from Selected Countries (in Persian)

Aziz Arman (), Ahmad Salahmanesh () and Farzaneh Shalyari
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Aziz Arman: Professor of Economics, Shahid Chamran University of Ahvaz, Khuzestan, Iran.
Ahmad Salahmanesh: Assistant Professor of Economics, Shahid Chamran University of Ahvaz, Khuzestan, Iran.
Farzaneh Shalyari: Ph.D. Student in Economics, Shahid Chamran University of Ahvaz, Khuzestan, Iran.

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2020, vol. 25, issue 1, 29-51

Abstract: Achieving optimal economic growth is always one of the most important goals of any country, and due to the role of public debt in financing capital and economic growth, different views have been formed in this regard. One of the most recent views pertains to the non-linear relationship between public debt and economic growth. In this view, in the first regime, public debt has a positive and significant effect on economic growth, while in the second regime and after crossing the threshold level, it has a negative effect on economic growth. Accordingly, this study attempts to investigate the nonlinear effect of public debt on the economic growth rate for a selected group of countries; it also attempts to determine their respective threshold level. For this purpose, using the data for the period 1980-2017 and the Pool model, the existence of nonlinear effect of public debt on economic growth was investigated; In addition, using the threshold regression model (PTR), the debt threshold level of each country was determined. Findings confirmed an asymmetric U-reverse effect of public debt on economic growth. Correspondingly, it was found that the threshold level in the selected countries is lower on average compared with developed countries.

Keywords: Economic Growth; Public Debt; Threshold Regression; Inflation; Threshold Effect. (search for similar items in EconPapers)
JEL-codes: E62 F34 H11 H62 (search for similar items in EconPapers)
Date: 2020
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