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Debt and growth: A non-parametric approach

Juan Brida (), David Gómez () and Maria Nela Seijas

Physica A: Statistical Mechanics and its Applications, 2017, vol. 486, issue C, 883-894

Abstract: In this study, we explore the dynamic relationship between public debt and economic growth by using a non-parametric approach based on data symbolization and clustering methods. The study uses annual data of general government consolidated gross debt-to-GDP ratio and gross domestic product for sixteen countries between 1977 and 2015. Using symbolic sequences, we introduce a notion of distance between the dynamical paths of different countries. Then, a Minimal Spanning Tree and a Hierarchical Tree are constructed from time series to help detecting the existence of groups of countries sharing similar economic performance. The main finding of the study appears for the period 2008–2016 when several countries surpassed the 90% debt-to-GDP threshold. During this period, three groups (clubs) of countries are obtained: high, mid and low indebted countries, suggesting that the employed debt-to-GDP threshold drives economic dynamics for the selected countries.

Keywords: Data symbolization; Minimum spanning tree; Multidimensional clustering methods; Debt–growth regimes; Public debt; Euro crisis (search for similar items in EconPapers)
JEL-codes: C45 F34 F36 O49 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:486:y:2017:i:c:p:883-894

DOI: 10.1016/j.physa.2017.05.060

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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