## Debt and Growth: Is There a Magic Threshold?

_IMF Working Papers, February 13, 2014_

## Source details

**Canonical URL:** [Debt and Growth: Is There a Magic Threshold?](https://www.imf.org/en/publications/wp/issues/2016/12/31/debt-and-growth-is-there-a-magic-threshold-41352)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/debt-and-growth-is-there-a-magic-threshold-41352/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/debt-and-growth-is-there-a-magic-threshold-41352/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/debt-and-growth-is-there-a-magic-threshold-41352/bundle-manifest.json)

## Bibliographic details
- Authors: Andrea Pescatori, Damiano Sandri, John Simon
- Published: February 13, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484306444.001

---

### Key findings
- Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, the authors find no evidence of any particular debt threshold above which medium-term growth prospects are dramatically compromised.
- The debt trajectory can be as important as the debt level in understanding future growth prospects: countries with high but declining debt appear to grow equally as fast as countries with lower debt.
- There is some evidence that higher debt is associated with a higher degree of output volatility.

### Evidence and analysis approach
- Empirical approach: described as a "novel empirical approach" (details are part of the Working Paper).
- Dataset: an extensive dataset developed by the Fiscal Affairs Department of the IMF.
- Focus: relationship between public debt (GDP ratio and trajectory) and medium-term growth prospects, including output volatility and growth rates.

### Interpretations and implications
- No single debt-to-GDP threshold was identified that reliably predicts sharply lower medium-term growth outcomes.
- Debt dynamics matter: improving debt trajectories (declining debt) can offset the negative associations typically attributed to higher debt levels when assessing future growth.
- Higher debt may not uniformly reduce growth but may increase output volatility, which has implications for macroeconomic stability assessments.

### Publication note
- This content summarizes findings from an IMF Working Paper authored by Andrea Pescatori, Damiano Sandri, and John Simon.

*Source: Debt and Growth: Is There a Magic Threshold? By Andrea Pescatori, Damiano Sandri, John Simon, February 13, 2014.*

---

## Content in this bundle

- **Wp1434**
  - [Wp1434 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1434.pdf.md){rel="alternate" type="text/markdown"}
  - [Wp1434 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1434.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/debt-and-growth-is-there-a-magic-threshold-41352_