Volume 24, Issue 4 (Winter 2020)
JPBUD 2020, 24(4): 43-56 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Zare R. (2020). Nonlinear Impacts of Public Debt on Economic Growth: A Dynamic Panel Threshold Approach. JPBUD. 24(4), 43-56. doi:10.29252/jpbud.24.4.43
URL: http://jpbud.ir/article-1-1827-en.html
URL: http://jpbud.ir/article-1-1827-en.html
Assistant Professor, Department of Economics, Islamic Azad University, Beyza Branch, Iran. , zare@biau.ac.ir
Abstract: (4363 Views)
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.
Type of Study: Applicable |
Subject:
public economics
Received: Oct 06 2019 | Accepted: Sep 09 2020 | ePublished: Nov 08 2020
Received: Oct 06 2019 | Accepted: Sep 09 2020 | ePublished: Nov 08 2020
References
1. Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error-Components Models. Journal of Econometrics, 68(1), 29-51. [DOI:10.1016/0304-4076(94)01642-D]
2. Baum, A., Checherita-Westphal, C., & Rother, P. (2013). Debt and Growth: New Evidence for the Euro Area. Journal of International Money and Finance, 32(1), 809-821. [DOI:10.1016/j.jimonfin.2012.07.004]
3. Bräuninger, M. (2005). The Budget Deficit, Public Debt, and Endogenous Growth. Journal of Public Economic Theory, 7(5), 827-840. [DOI:10.1111/j.1467-9779.2005.00247.x]
4. Brida, J. G., Gómez, D. M., & Seijas, M. N. (2017). Debt and Growth: A Non-Parametric Approach. Physica A: Statistical Mechanics and Its Applications, 486(1), 883-894. [DOI:10.1016/j.physa.2017.05.060]
5. Caner, M., & Hansen, B. E. (2004). Instrumental Variable Estimation of a Threshold Model. Econometric Theory, 20(5), 813-843. [DOI:10.1017/S0266466604205011]
6. Cecchetti, S. G., Mohanty, M. S., & Zampolli, F. (2011). The Real Effects of Debt. BIS Working Paper, No. 352.
7. Checherita-Westphal, C., & Rother, P. (2012). The Impact of High Government Debt on Economic Growth and Its Channels: An Empirical Investigation for the Euro Area. European Economic Review, 56(7), 1392-1405. [DOI:10.1016/j.euroecorev.2012.06.007]
8. Eberhardt, M. M., & Presbitero, A. (2013). This Time They are Different: Heterogeneity and Nonlinearity in the Relationship between Debt and Growth: International Monetary Fund. [DOI:10.2139/ssrn.2381847]
9. Égert, B. (2015). Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality? Journal of Macroeconomics, 43(1), 226-238. [DOI:10.1016/j.jmacro.2014.11.006]
10. Futagami, K., Hori, T., & Ohdoi, R. (2010). Debt Policy and Economic Growth in a Small Open Economy Model with Productive Government Spending. ADBI Working Paper, No. 212. [DOI:10.2139/ssrn.1589986]
11. Gale, W. G., & Orszag, P. R. (2003). Economic Effects of Sustained Budget Deficits. National Tax Journal, 56(3), 463-485. [DOI:10.17310/ntj.2003.3.02]
12. Hansen, B. E. (1999). Threshold Effects in Non-Dynamic Panels: Estimation, Testing, and Inference. Journal of Econometrics, 93(2), 345-368. [DOI:10.1016/S0304-4076(99)00025-1]
13. Hansen, B. E. (2000). Sample Splitting and Threshold Estimation. Econometrica, 68(3), 575-603. [DOI:10.1111/1468-0262.00124]
14. Karadam, D. Y. (2018). An Investigation of Nonlinear Effects of Debt on Growth. The Journal of Economic Asymmetries, 18(1), e00097. [DOI:10.1016/j.jeca.2018.e00097]
15. Kremer, S., Bick, A., & Nautz, D. (2013). Inflation and Growth: New Evidence from a Dynamic Panel Threshold Analysis. Empirical Economics, 44(2), 861-878. [DOI:10.1007/s00181-012-0553-9]
16. Krugman, P. (1988). Financing vs. Forgiving a Debt Overhang. NBER Working Paper, No. 2486. [DOI:10.3386/w2486]
17. Kumar, M. M. S., & Baldacci, M. E. (2010). Fiscal Deficits, Public Debt, and Sovereign Bond Yields: International Monetary Fund. [DOI:10.5089/9781455202188.001]
18. Pescatori, A., Sandri, D., & Simon, J. (2014). Debt and Growth: Is There a Magic Threshold? International Monetary Fund. [DOI:10.2139/ssrn.2407527]
19. Poirson, M. H., Ricci, M. L. A., & Pattillo, M. C. A. (2004). What Are the Channels Through Which External Debt Affects Growth? International Monetary Fund. [DOI:10.5089/9781451843293.001]
20. Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a Time of Debt. American Economic Review, 100(2), 573-578. [DOI:10.1257/aer.100.2.573]
| Rights and permissions | |
.jpg) |
This work is licensed under a Creative Commons Attribution 4.0 International License. |
