This Time They Are Different: Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth

Author/Editor:

Markus Eberhardt ; Andrea F Presbitero

Publication Date:

December 17, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We study the long-run relationship between public debt and growth in a large panel of countries. Our analysis takes particular note of theoretical arguments and data considerations in modeling the debt-growth relationship as heterogeneous across countries. We investigate the issue of nonlinearities (debt thresholds) in both the cross-country and within-country dimensions, employing novel methods and diagnostics from the time-series literature adapted for use in the panel. We find some support for a nonlinear relationship between debt and long-run growth across countries, but no evidence for common debt thresholds within countries over time.

Series:

Working Paper No. 2013/248

Subject:

Debt burden External debt Financial crises Financial institutions Financial markets Financial sector development National accounts Personal income Public debt Stocks

English

Publication Date:

December 17, 2013

ISBN/ISSN:

9781484309285/1018-5941

Stock No:

WPIEA2013248

Pages:

55

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