This Time They Are Different: Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth
December 17, 2013
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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.
Subject: Debt burden, External debt, Financial crises, Financial institutions, Financial markets, Financial sector development, National accounts, Personal income, Public debt, Stocks
Keywords: asymmetric ARDL, common factor model, Debt burden, debt coefficient, descriptive analysis, Financial sector development, GDP ratio, Global, growth, growth rate, linear regression, nonlinearity, Personal income, public debt, Stocks, WP
Pages:
55
Volume:
2013
DOI:
Issue:
248
Series:
Working Paper No. 2013/248
Stock No:
WPIEA2013248
ISBN:
9781484309285
ISSN:
1018-5941
