Is There a Debt-threshold Effect on Output Growth?

Released on by Mr.Alexander Chudik
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  • Is There a Debt-threshold Effect on Output Growth? Book Detail

  • Author : Mr.Alexander Chudik
  • Release Date : 2015-09-08
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 59
  • ISBN 13 : 1513513354
  • File Size : 52,52 MB
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Is There a Debt-threshold Effect on Output Growth? by Mr.Alexander Chudik PDF Summary

Book Description: This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with cross-sectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965- 2010 period, we find no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers in the long run.

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Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, we find no evidence of any particular debt thre

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This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost fo