Nonlinear Effects of Government Debt on Private Consumption in OECD Countries
Dooyeon Cho and
No 13-5, Working Papers from Korea Institute for International Economic Policy
This paper investigates nonlinear effects of government debt on private consumption in 16 OECD countries. The estimated consumption function shows smooth regime switching depending on the debt-to-GDP ratio, and the threshold level of regime switching is found to be the ratio of 83.7 percent. The results reveal that a higher level of government debt crowds out private consumption to a greater extent, and that the degree of the crowding out effect has deteriorated since the global financial crisis.
Keywords: Consumption; Government Debt; Nonlinearity; Panel Smooth Transition Regression Model (search for similar items in EconPapers)
JEL-codes: C23 E21 E62 H63 (search for similar items in EconPapers)
Pages: 38 pages
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepwp:2013_005
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