Public Debt and Growth
IMF Working Papers, July 1, 2010
Source details
- Canonical URL
- Public Debt and Growth
Other formats
Bibliographic details
- Authors: Jaejoon Woo, Manmohan S. Kumar
- Published: July 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455201853.001
Key findings
- The empirical results suggest an inverse relationship between initial debt and subsequent growth.
- On average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year.
- The impact is somewhat smaller in advanced economies.
- There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth.
- The adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
Analysis and scope
- Analysis based on a panel of advanced and emerging economies over almost four decades.
- The study takes into account a broad range of determinants of growth and addresses estimation issues including reverse causality and endogeneity.
- Threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined.
Methodology and technical notes
- Estimation techniques and considerations include addressing reverse causality and endogeneity.
- The study examines threshold effects and nonlinearities across country groups (advanced and emerging).
Content in this bundle
- Public Debt and Growth;by Manmohan S. Kumar and Jaejoon Woo; IMF Working Paper 10/174;July 1, 2010