Public debt and economic growth conundrum: nonlinearity and inter-temporal relationship

Vladimir Arčabić; Josip Tica; Junsoo Lee; Robert J. Sonora

doi:10.1515/snde-2016-0086

Article

Public debt and economic growth conundrum: nonlinearity and inter-temporal relationship

Vladimir Arčabić , Josip Tica , Junsoo Lee and Robert J. Sonora

Published/Copyright: February 13, 2018

Published by

Become an author with De Gruyter Brill

Submit Manuscript Author Information

From the journal Studies in Nonlinear Dynamics & Econometrics Volume 22 Issue 1

Abstract

The influential paper by Reinhart and Rogoff (Reinhart, C. M., and K. S. Rogoff. 2010. “Growth in a Time of Debt.” The American Economic Review 100: 573–578.) has triggered a debate about the effects of the public debt on GDP growth. They argue that a debt-to-GDP ratio of over 90 percent has a deleterious effect on long-run economic growth. In this paper, we examine the inter-temporal relationship between public debt and GDP growth rates. We examine debt-to-GDP thresholds in nonlinear panel models, using various econometric strategies, methodologies, and data samples. We also evaluate confidence intervals around the estimated thresholds to determine the accuracy of estimated thresholds. Our results demonstrate that in the majority of estimated models, threshold values are not uniquely defined and the estimated coefficients are insignificant in most model specifications, as in Enders, Falk, and Siklos (Enders, W., B. L. Falk, and P. Siklos. 2007. “A Threshold Model of Real US GDP and the Problem of Constructing Confidence Intervals in TAR Models.” Studies in Nonlinear Dynamics & Econometrics 11: 1322.). Next, we examine the inter-temporal relationship between the public debt and economic growth using structural panel data models as well as reduced form panel VAR models. In contrast to the standard presumption in the literature, we find that the inter-temporal effect of economic growth on the public debt is strong, but the effect of the public debt on economic growth is weak. We find similar results in sub-samples that include countries where the public debt is over 90 percent of GDP.

Keywords: economic growth; feedback effect; panel data model; public debt; threshold

Funding source: European Social Fund

Award Identifier / Grant number: SPIRITH

Funding source: Hrvatska Zaklada za Znanost

Award Identifier / Grant number: 7031

Funding statement: Financial support from European Social Fund (Funder Id: 10.13039/501100004895 and Grant Number: SPIRITH) and Hrvatska Zaklada za Znanost (Funder Id: 10.13039/501100004488 and Grant Number: 7031).

A Appendix

A.1 Data description and literature survey

Table 5:

Survey of literature.

Authors	Feedback effect	Reverse causality	Confidence bands	Endogenous threshold	Number of Regimes	Local currency GDP	Non-overlapping frequency	Sys-GMM
Reinhart and Rogoff (2010)	∘	∘	∘	∘	3	∘	∘	∘
Kumar and Woo (2010)	∘	∘	∘	∘	3	∘	·	·
Caner, Grennes, and Koehler-Geib (2010)	∘	∘	∘	•	2	∘	∘	∘
Cecchetti, Mohanty, and Zampolli (2011)	∘	∘	∘	•	2	∘	∘	∘
Checherita-Westphal and Rother (2012)	∘	∘	∘	∘	2	∘	•	•
Egert (2012)	∘	∘	∘	•	2–4	∘	•	∘
Minea and Parent (2012)	∘	∘	∘	•	4	∘	∘	∘
Panizza and Presbitero (2014)	∘	∘	∘	∘	linear	∘	∘	∘
Kourtellos, Stengos, and Tan (2012)	∘	∘	∘	•	2	∘	•	•
Baum, Checherita-Westphal, and Rother (2013)	∘	∘	∘	•	2	∘	∘	•
Herndon, Ash, and Pollin (2013)	∘	∘	∘	∘	2	∘	∘	∘
Afonso and Jalles (2013)	∘	∘	∘	•	2	∘	•	•
Eberhardt and Presbitero (2013)	∘	•	∘	∘	linear	∘	∘	∘
Lof and Malinen (2014)	∘	•	∘	∘	linear	∘	∘	∘
Pescatori, Sandri, and Simon (2014)	∘	∘	∘	∘	2	∘	∘	∘
Chudik et al. (2017)	∘	∘	∘	•	2	∘	∘	∘

“•” denote that the paper employs or controls for the specific methodological characteristics while “∘” denotes that the paper does not.

Table 6:

Data sets and subsamples.

	Time period	Frequency	N	T
Data Set A	1960–2009	5-year non-overlapping averages	261	10
Data Set B	1960–2009	annual	262	50
Data Set C	1880–2009	annual	262	130
OECD economies	1960–2009	5-year non-overlapping averages	34	10
Non-OECD economies	1960–2009	5-year non-overlapping averages	185	10
Data Set B, debt>90%	1960–2009	annual	259	50
Data Set C, debt>90%	1880–2009	annual	262	130

Table 7:

Data sources and explanations.

Variable	Source
Main Variables
Public debt to GDP ratio	Abbas et al. (2010)
GDP in local currency units	The World Bank (2014)
GDP in PPP	Maddison (2010)
Control Variables
Secondary school enrollment	Barro and Lee (2010)
Gross fixed capital formation in percent of GDP	The World Bank (2014)
Imports and Exports of goods and services as a percent of GDP	The World Bank (2014)
Age dependency ratio (percent of working-age population)	The World Bank (2014)
Total population	The World Bank (2014)
Consumer price index (2005 = 100)	The World Bank (2014)
Average maturity on new external debt commitments in years	The World Bank (2014)

Table 8:

Data availability for public debt in OECD and non-OECD countries.

Country	Time period	Country	Time period	Country	Time period
Albania	1994–2009	Gambia	1973–2009	Norway*	1880–2009
Algeria	1970–2009	Georgia	1995–2009	Oman	1973–2009
Angola	1995–2009	Germany*	1880–2009	Pakistan	1951–2009
Antigua and Barb.	1998–2009	Ghana	1962–2009	Panama	1953–2009
Argentina	1884–2009	Greece*	1884–2009	Papua New Guinea	1973–2007
Armenia	1993–2009	Grenada	1970–2009	Paraguay	1970–2009
Australia*	1901–2009	Guatemala	1923–2009	Peru	1918–2009
Austria*	1880–2009	Guinea	1990–2009	Phillipines	1948–2009
Azerbaijan	1993–2009	Guinea-Bissau	1986–2009	Poland*	1986–2009
Bahamas	1968–2009	Guyana	1963–2009	Portugal*	1880–2009
Bahrain	1974–2009	Haiti	1970–2009	Qatar	1990–2009
Bangladesh	1974–2009	Honduras	1926–2009	Romania	1990–2009
Barbados	1970–2009	Hungary*	1928–2009	Russian Fed.	1885–2009
Belarus	1994–2009	Iceland*	1951–2009	Rwanda	1970–2009
Belgium*	1880–2009	India	1948–2009	Samoa	1970–2009
Belize	1976–2009	Indonesia	1976–2009	Sao Tome & Principe	1995–2007
Benin	1970–2009	Iran	1970–2009	Saudi Arabia	1991–2009
Bhutan	1982–2009	Ireland*	1929–2009	Senegal	1970–2009
Bolivia	1970–2009	Israel*	1972–2009	Serbia	2000–2009
Bosnia & Herz.	1998–2009	Italy*	1880–2009	Seychelles	1973–2009
Botswana	1972–2009	Jamaica	1963–2009	Sierra Leone	1970–2009
Brazil	1880–2009	Japan*	1880–2009	Singapore	1963–2009
Brunei Dar.	2001–2007	Jordan	1970–2009	Slovak Rep.*	1992–2009
Bulgaria	1992–2009	Kazakhstan	1993–2009	Slovenia*	1993–2009
Burkina Faso	1976–2009	Kenya	1961–2009	Solomon Islands	1980–2009
Burundi	1964–2009	Korea*	1958–2009	South Africa	1914–2009
Cambodia	1996–2009	Kuwait	1971–2009	Spain*	1880–2009
Cameroon	1970–2009	Kyrgyz Rep.	1995–2009	Sri Lanka	1951–2009
Canada*	1880–2009	Lao	1989–2009	St. Kitts and Nevis	1984–2009
Cape Verde	1981–2009	Latvia	1994–2009	St. Lucia	1981–2009
Central African Rep.	1970–2009	Lebanon	1970–2009	St. Vincent & Grens.	1975–2009
Chad	1970–2009	Lesotho	1973–2009	Sudan	1992–2009
Chile*	1970–2009	Liberia	1973–2009	Suriname	1971–2009
China (Mainland)	1984–2009	Libya	1973–2009	Swaziland	1970–2009
China (Hong Kong)	2001–2009	Lithuania	1994–2009	Sweden*	1880–2009
Colombia	1958–2009	Luxembourg*	1974–2009	Switzerland*	1899–2009
Comoros	1982–2009	Macedonia	1995–2009	Syrian Arab Rep.	1970–2009
Congo, Dem. Rep. of	1970–2009	Madagascar	1971–2009	Taiwan	1997–2009
Congo, Rep. of	1970–2009	Malawi	1970–2009	Tajikistan	1998–2009
Costa Rica	1950–2009	Malaysia	1953–2009	Tanzania	1970–2009
Cote d’Ivoire	1979–2009	Maldives	1978–2009	Thailand	1954–2009
Croatia	1994–2009	Mali	1970–2009	Togo	1975–2009
Cyprus	1970–2009	Malta	1965–2009	Tonga	1985–2009
Czech Rep.*	1993–2009	Mauritania	1977–2009	Trinidad & Tobago	1963–2009
Denmark*	1880–2009	Mauritius	1970–2009	Tunisia	1970–2009
Djibouti	1993–2009	Mexico*	1914–2009	Turkey*	1936–2009
Dominica	1975–2009	Moldova	1995–2009	Turkmenistan	1997–2009
Dominican Rep.	1970–2009	Mongolia	1992–2007	Uganda	1970–2009
Ecuador	1939–2009	Montenegro	2002–2009	United Kingdom*	1880–2009
Egypt	1929–2009	Morocco	1965–2009	Ukraine	1992–2009
El Salvador	1939–2009	Mozambique	1999–2009	United Arab Emirates	1973–2009
Equatorial Guinea	1980–2009	Myanmar	1970–2009	United States*	1880–2009
Eritrea	1995–2009	Namibia	1993–2009	Uruguay	1970–2009
Estonia*	1995–2009	Nepal	1970–2009	Uzbekistan	1998–2009
Ethiopia	1970–2009	Netherlands*	1880–2009	Vanuatu	1981–2007
Fiji	1970–2009	New Zealand*	1880–2009	Venezuela	1920–2009
Finland*	1914–2009	Nicaragua	1970–2009	Vietnam	1992–2009
France*	1880–2009	Niger	1970–2009	Yemen	1992–2009
Gabon	1970–2009	Nigeria	1968–2009	Zambia	1970–2009
				Zimbabwe	1964–2009

* indicates OECD countries in Table 2. Source: Abbas et al. (2010).

B Appendix

B.1 Threshold model results with control variables and estimated statistics

Table 9:

Data Set A: 5-year frequency non-overlapping data (1960–2009).

	FE	GMM	SYS-GMM	FE-IV	GMM-IV
Regime $q_{i, t - d} \leq θ^{*}$ $qi,t−d≤θ∗$
$y_{i, t - 1}$ $yi,t−1$	−0.097*			0.185
	(−1.84)			(1.02)
b_i,t	−0.005*	−0.007*	−0.012**	0.040*	−0.009
	(−1.79)	(−1.73)	(−2.01)	(1.84)	(−1.57)
Capital	0.035***	0.016	0.028***	0.066***	0.020
	(5.32)	(1.61)	(4.53)	(3.08)	(1.29)
Education	−0.008	0.004	0.004	−0.017	0.022*
	(−1.28)	(0.48)	(0.94)	(−1.49)	(1.71)
y₀	−0.042***	−0.116***	−0.012***	−0.073***	−0.100***
	(−6.74)	(−10.89)	(−4.48)	(−4.89)	(−7.32)
Population	0.109	0.069	−0.473	0.207	0.767
	(0.22)	(0.19)	(−1.11)	(0.50)	(0.82)
Inflation	−0.023***	−0.043***	−0.027**	−0.041**	−0.054***
	(−3.61)	(−2.65)	(−2.52)	(−2.07)	(−5.01)
Openness	−0.001	−0.006	0.000	−0.032***	0.000
	(−0.14)	(−0.89)	(0.41)	(−2.88)	(−0.05)
Age dependency	−0.053***	−0.110***	−0.023	−0.129***	−0.096***
	(−3.53)	(−5.40)	(−1.54)	(−3.55)	(−3.04)
Regime $q_{i, t - d} > θ^{*}$ $qi,t−d>θ∗$
$y_{i, t - 1}$ $yi,t−1$	−0.037			0.241
	(−0.57)			(1.35)
b_i,t	−0.004*	−0.008***	−0.003	0.089**	−0.006*
	(−1.70)	(−3.22)	(−0.89)	(2.37)	(−1.70)
Capital	0.032***	0.030***	0.023***	0.040***	0.024***
	(4.53)	(5.26)	(3.70)	(4.44)	(2.81)
Education	−0.013*	−0.005	0.001	−0.017*	0.007
	(−1.78)	(−0.71)	(0.16)	(−1.80)	(0.93)
y₀	−0.040***	−0.093***	−0.011***	−0.054***	−0.083***
	(−6.15)	(−11.08)	(−2.84)	(−5.46)	(−7.26)
Population	0.665	0.426	−0.209	0.013	0.152
	(1.24)	(1.53)	(−0.79)	(0.04)	(0.33)
Inflation	−0.046***	−0.036***	−0.046***	−0.032***	−0.029***
	(−6.52)	(−5.15)	(−4.64)	(−3.50)	(−2.70)
Openness	−0.002	−0.005	−0.001	−0.029***	−0.001
	(−0.24)	(−0.74)	(−0.81)	(−2.82)	(−0.11)
Age dependency	−0.056***	−0.085***	−0.029**	−0.115***	−0.079***
	(−3.49)	(−5.25)	(−2.04)	(−3.78)	(−3.24)
$y_{i, t - 1}$ $yi,t−1$		−0.061	0.029		−0.044
		(−1.60)	(0.64)		(−0.77)
Constant	−0.105	−0.348*	0.035	−0.921***	−0.19
	(−0.49)	(−1.79)	(0.60)	(−2.87)	(−0.71)
Wald test results (p-values)
β₁ = β₂	0.675	0.818	0.097	0.047	0.561
ϕ₁ = ϕ₂	0.013	0.000	0.197	0.139	0.022

*, ** and *** indicate statistical significance at 10%, 5% and 1% levels respectively. t-statistics are in parenthesis. p-values from the Wald test on β₁ = β₂ or ϕ₁ = ϕ₂ are reported, where ϕ_i = (ρ_i, β_i, δ_i)’ for i = 1, 2. FE is the fixed effects model, GMM is generalized method of moments, SYS-GMM is the System-GMM model, FE-IV is fixed effects with instrumental variables and GMM-IV is GMM with instrumental variables.

Table 10:

Data Set B: short-run annual data (1960–2009).

	FE	GMM	SYS-GMM	FE-IV	GMM-IV
Regime $q_{i, t - d} \leq θ^{*}$ $qi,t−d≤θ∗$
$y_{i, t - 1}$ $yi,t−1$	0.136**			0.155***
	(2.32)			(7.01)
b_i,t	0.007	0.007**	−0.013	0.010***	0.011
	(1.05)	(2.18)	(−1.09)	(4.43)	(0.69)
Capital	0.009	0.036***	0.018	0.024***	0.021
	(1.34)	(6.50)	(0.97)	(6.72)	(0.78)
Population	−0.659**	−0.849*	0.455	−0.429***	−1.272*
	(−2.41)	(−1.78)	(0.42)	(−3.64)	(−1.73)
y₀	0.000	0.291***	−0.014*	0.001	0.295***
	(.)	(9.21)	(−1.83)	(0.60)	(3.82)
Inflation	−0.051***	−0.033***	−0.035***	−0.030***	−0.085**
	(−2.86)	(−6.10)	(−2.98)	(−6.21)	(−2.25)
Openness	0.001	−0.089***	0.003	0.002	−0.068***
	(0.19)	(−17.63)	(1.21)	(0.65)	(−3.33)
Age dependency	−0.014	−0.047	0.026	−0.021**	0.057
	(−1.09)	(−1.21)	(0.75)	(−2.50)	(1.12)
Regime $q_{i, t - d} > θ^{*}$ $qi,t−d>θ∗$
$y_{i, t - 1}$ $yi,t−1$	0.111***			0.140***
	(3.07)			(5.21)
b_i,t	−0.008***	−0.007**	−0.010	−0.000	−0.011
	(−2.94)	(−2.29)	(−0.96)	(−0.02)	(−0.26)
Capital	0.027***	0.034***	0.017	0.023***	0.034**
	(6.23)	(6.77)	(1.35)	(6.54)	(2.36)
Population	−0.529***	−1.955***	0.749	−0.730***	−1.927
	(−4.01)	(−4.51)	(0.71)	(−5.00)	(−1.47)
y₀	0.002	0.282***	−0.004	0.000	0.297***
	(0.36)	(8.96)	(−0.64)	(.)	(3.85)
Inflation	−0.019***	−0.015***	−0.011**	−0.015***	−0.014**
	(−4.72)	(−6.48)	(−2.32)	(−4.50)	(−2.18)
Openness	0.002	−0.088***	−0.005***	0.001	−0.069***
	(0.41)	(−16.69)	(−3.21)	(0.23)	(−3.21)
Age dependency	−0.007	−0.036	−0.003	−0.017*	0.067
	(−0.82)	(−0.90)	(−0.06)	(−1.73)	(1.30)
$y_{i, t - 1}$ $yi,t−1$		0.088***	0.090		0.080**
		(4.89)	(0.91)		(2.00)
Constant	0.087	0.000	−3.543*	0.059	0.000
	(0.60)	(.)	(−1.92)	(0.75)	(.)
Wald test results (p-values)
β₁ = β₂	0.069	0.000	0.844	0.033	0.530
ϕ₁ = ϕ₂	0.011	0.000	0.000	0.025	0.190

See notes in Table 9.

Table 11:

Data Set C: long-run annual data (1880–2009).

	FE	GMM	SYS-GMM	FE-IV	GMM-IV
Regime $q_{i, t - d} \leq θ^{*}$ $qi,t−d≤θ∗$
$y_{i, t - 1}$ $yi,t−1$	0.237***			0.221***
	(6.37)			(12.49)
b_i,t	−0.003*	−0.016	−0.012	−0.001	−0.023
	(−1.92)	(−1.35)	(−0.75)	(−0.49)	(−0.03)
Regime $q_{i, t - d} > θ^{*}$ $qi,t−d>θ∗$
$y_{i, t - 1}$ $yi,t−1$	0.151***			0.117***
	(3.50)			(6.37)
b_i,t	−0.002	−0.016	−0.010	0.000	−0.025
	(−1.15)	(−1.24)	(−0.72)	(0.28)	(−0.03)
$y_{i, t - 1}$ $yi,t−1$		0.139***	0.148**		0.102
		(7.27)	(2.48)		(0.07)
Constant	−0.003	0.081***	0.063	0.027***	−0.125
	(−0.23)	(2.99)	(1.27)	(4.22)	(−0.04)
Wald test results (p-values)
$β_{1} = β_{2}$ $β1=β2$	0.118	0.957	0.698	0.037	0.984

See notes in Table 9.

Figure 3: Threshold values and estimated statistics (Data Set A).Note: Potential threshold values of the debt/GDP ratio (horizontal axis) are shown against the matching RMSE, Hansen J or RSS statistics (vertical axis) obtained from a grid search. Confidence intervals are shaded areas and the vertical line represents the debt/GDP value that minimizes test statistics in the grid search.

Figure 3:

Threshold values and estimated statistics (Data Set A).

Note: Potential threshold values of the debt/GDP ratio (horizontal axis) are shown against the matching RMSE, Hansen J or RSS statistics (vertical axis) obtained from a grid search. Confidence intervals are shaded areas and the vertical line represents the debt/GDP value that minimizes test statistics in the grid search.

References

Abbas, S. A., N. Belhocine, A. Elganainy, and M. Horton. 2010. “A Historical Public Debt Database.” IMF Working Paper, No. 10/245.10.2139/ssrn.1750734Search in Google Scholar

Abrigo, M. R., and I. Love. 2015. “Estimation of Panel Vector Autoregression in Stata.” The Stata Journal 16: 778–804.10.1177/1536867X1601600314Search in Google Scholar

Afonso, A., and J. T. Jalles. 2013. “Growth and Productivity: The Role of Government Debt.” International Review of Economics and Finance 25: 384–407.10.1016/j.iref.2012.07.004Search in Google Scholar

Arellano, M., and S. Bond. 1991. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.” Review of Economic Studies 58: 277–297.10.2307/2297968Search in Google Scholar

Arellano, M., and O. Bover. 1995. “Another Look at the Instrumental Variable Estimation of Error-Components Models.” Journal of Econometrics 68: 29–51.10.1016/0304-4076(94)01642-DSearch in Google Scholar

Barro, R. J., and J.-W. Lee. 2010. “A New Data Set of Educational Attainment in the World, 1950–2010.” Working Paper 15902, National Bureau of Economic Research.10.3386/w15902Search in Google Scholar

Baum, A., C. Checherita-Westphal, and P. Rother. 2013. “Debt and Growth: New Evidence for the Euro Area.” Journal of International Money and Finance 32: 809–821.10.1016/j.jimonfin.2012.07.004Search in Google Scholar

Caner, M., T. Grennes, and F. Koehler-Geib. 2010. “Finding the Tipping Point—When Sovereign Debt Turns Bad.” The World Bank Policy Research Working Paper.10.1596/1813-9450-5391Search in Google Scholar

Cecchetti, S. G., M. Mohanty, and F. Zampolli. 2011. “Achieving Growth Amid Fiscal Imbalances: The Real Effects of Debt.” In Proceedings - Economic Policy Symposium - Jackson Hole, 145–196.Search in Google Scholar

Checherita-Westphal, C., and P. Rother. 2012. “The Impact of High Government Debt on Economic Growth and Its Channels: An Empirical Investigation for the Euro Area.” European Economic Review 56: 1392–1405.10.1016/j.euroecorev.2012.06.007Search in Google Scholar

Chudik, A., K. Mohaddes, M. H. Pesaran, and M. Raissi. 2017. “Is There a Debt-Threshold Effect on Output Growth?” Review of Economics and Statistics 99: 135–150.10.1162/REST_a_00593Search in Google Scholar

Cottarelli, C. 2012. “Fiscal Policy: Reconciling Fiscal Sustainability and Growth.” IMF, Fiscal Affairs Department, Presentation.Search in Google Scholar

Delong, J. B., and L. H. Summers. 2012. “Fiscal Policy in a Depressed Economy.” Brookings Papers on Economic Activity 2012: 233–297.10.1353/eca.2012.0000Search in Google Scholar

Di Sanzo, S., and M. Bella. 2015. “Public Debt and Growth in the Euro Area: Evidence from Parametric and Nonparametric Granger Causality.” The BE Journal of Macroeconomics 15: 631–648.10.1515/bejm-2014-0028Search in Google Scholar

Dube, A. 2013. “A Note on Debt, Growth and Causality.” Technical report, University of Massachusetts, Amherst, Working Paper.Search in Google Scholar

Eberhardt, M., and A. F. Presbitero. 2013. “This Time They’re Different: Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth.” Centre for Finance, Credit and Macroeconomics Working Paper.10.5089/9781484309285.001Search in Google Scholar

Egert, B. 2012. “Public Debt, Economic Growth and Nonlinear Effects, Myth or Reality?” OECD Economics Department Working Paper.10.2139/ssrn.2243421Search in Google Scholar

Elmendorf, D. W., and N. G. Mankiw. 1998. “Government Debt.” NBER Working Papers 6470, National Bureau of Economic Research, Inc.10.3386/w6470Search in Google Scholar

Enders, W., B. L. Falk, and P. Siklos. 2007. “A Threshold Model of Real U.S. GDP and the Problem of Constructing Confidence Intervals in TAR Models.” Studies in Nonlinear Dynamics & Econometrics 11(3). DOI: https://doi.org/10.2202/1558-3708.1322.Search in Google Scholar

Greiner, A. 2011. “Economic Growth, Public Debt and Welfare: Comparing Three Budgetary Rules.” German Economic Review 12: 205–222.10.1111/j.1468-0475.2010.00516.xSearch in Google Scholar

Greiner, A. 2013. “Sustainable Public Debt and Economic Growth Under Wage Rigidity.” Metroeconomica 64: 272–292.10.1111/meca.12006Search in Google Scholar

Herndon, T., M. Ash, and R. Pollin. 2013. “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff.” Working Papers, Political Economy Research Institute, University of Massachusetts, Amherst.10.1093/cje/bet075Search in Google Scholar

Holtz-Eakin, D., W. Newey, and H. S. Rosen. 1988. “Estimating Vector Autoregressions with Panel Data.” Econometrica 1371–1395.10.2307/1913103Search in Google Scholar

Kourtellos, A., T. Stengos, and C. M. Tan. 2012. “The Effect of Public Debt on Growth in Multiple Regimes.” Journal of Macroeconomics 38: 35–43.10.1016/j.jmacro.2013.08.023Search in Google Scholar

Krugman, P. 1988. “Financing vs. Forgiving a Debt Overhang.” Journal of Development Economics 29: 253–268.10.3386/w2486Search in Google Scholar

Kumar, M. S., and J. Woo. 2010. “Public Debt and Growth.” IMF Working Paper, 10.10.2139/ssrn.1653188Search in Google Scholar

Lee, S., M. H. Seo, and Y. Shin. 2011. “Testing for Threshold Effects in Regression Models.” Journal of the American Statistical Association 106: 220–231.10.1198/jasa.2011.tm09800Search in Google Scholar

Lof, M., and T. Malinen. 2014. “Does Sovereign Debt Weaken Economic Growth? A Panel VAR Analysis.” Economics Letters 122: 403–407.10.1016/j.econlet.2013.12.037Search in Google Scholar

Maddison, A. 2010. “Historical Statistics.” http://www.ggdc.net/maddison/oriindex.htm. Accessed 19-May-2014.Search in Google Scholar

Minea, A., and A. Parent. 2012. “Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities.” CERDI Working Paper, 2012-18.Search in Google Scholar

Nuxoll, D. A. 1994. “Differences in Relative Prices and International Differences in Growth Rates.” American Economic Review 84: 1423–1436.Search in Google Scholar

Osborne, G. 2013. “2013 Conservative Party Conference Speech.” UKPOL. http://www.ukpol.co.uk/uncategorized/george-osborne-2013-conservative-party-conference-speech/.Search in Google Scholar

Panizza, U., and A. F. Presbitero. 2013. “Public Debt and Economic Growth in Advanced Economies: A Survey.” Swiss Journal of Economics and Statistics 149: 175–204.10.1007/BF03399388Search in Google Scholar

Panizza, U., and A. F. Presbitero. 2014. “Public Debt and Economic Growth: Is There a Causal Effect?” Journal of Macroeconomics 41: 21–41.10.1016/j.jmacro.2014.03.009Search in Google Scholar

Pescatori, A., D. Sandri, and J. Simon. 2014. Debt and Growth: Is There a Magic Threshold?. Working Paper 14-34, International Monetary Fund.10.5089/9781484306444.001Search in Google Scholar

Rehn, O. 2011. “Debt, Governance and Growth: A Euro Area Perspective, Letter.” Letter, European Commission for Economic and Monetary Affairs, Brussels, Belgium.Search in Google Scholar

Reinhart, C. M., and K. S. Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press.10.1515/9781400831722Search in Google Scholar

Reinhart, C. M., and K. S. Rogoff. 2010. “Growth in a Time of Debt.” The American Economic Review 100: 573–578.10.3386/w15639Search in Google Scholar

Reinhart, C. M., and K. S. Rogoff. 2011. “From Financial Crash to Debt Crisis.” The American Economic Review 101: 1676–1706.10.3386/w15795Search in Google Scholar

Ryan, P. 2012. “The Path to Prosperity: A Blueprint for American Renewal.” Technical report, US Congress, House Committee on the Budget, Washington, DC.Search in Google Scholar

Sachs, J. D. 1989. “The Debt Overhang of Developing Countries.” In Debt Stabilization and Development: Essays in Memory of Carlos Diaz Alejandro, edited by G. A. Calvo, R. Findlay, P. J. K. Kouri, and J. B. de Macedo. Oxford: Basil Blackwell.Search in Google Scholar

The World Bank. 2014. “World Development Indicators.” On-line database.Search in Google Scholar

Yu, P. 2013. “Inconsistency of 2SLS Estimators in Threshold Regression with Endogeneity.” Economics Letters 120: 532–536.10.1016/j.econlet.2013.06.023Search in Google Scholar

Yu, P. 2014. “The Bootstrap in Threshold Regression.” Econometric Theory 30: 676–714.10.1017/S0266466614000012Search in Google Scholar

Supplemental Material

The online version of this article offers supplementary material (DOI: https://doi.org/10.1515/snde-2016-0086).

Published Online: 2018-2-13

You are currently not able to access this content.

Supplementary material

Articles in the same Issue

https://doi.org/10.1515/snde-2016-0086

Keywords for this article

economic growth; feedback effect; panel data model; public debt; threshold

Public debt and economic growth conundrum: nonlinearity and inter-temporal relationship

Article

Abstract

A Appendix

A.1 Data description and literature survey

B Appendix

B.1 Threshold model results with control variables and estimated statistics

References

Supplemental Material

Supplementary Material

Articles in the same Issue

Articles in the same Issue

Articles in the same Issue