Threshold Effects of Sovereign Debt: Evidence from the Caribbean

 
Author/Editor: Greenidge, Kevin ; Craigwell, Roland ; Thomas, Chrystol ; Drakes, Lisa
 
Publication Date: June 01, 2012
 
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Summary: This paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55–56 percent. Moreover, the debt dynamics begin changing well before this threshold is reached. Specifically, at debt levels lower than 30 percent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 percent, the effects on economic growth diminishes rapidly and at debt levels reaching 55-56 percent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, debt becomes a drag on growth.
 
Series: Working Paper No. 12/157
Subject(s): Caribbean | Economic growth | Public debt | Sovereign debt

Author's Keyword(s): Debt Problems | Debt Threshold | Panel Data | Threshold Regressions
 
English
Publication Date: June 01, 2012
Format: Paper
Stock No: WPIEA2012157 Pages: 22
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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