Threshold Effects Of Sovereign Debt
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| Author | : Kevin Greenidge |
| Publisher | : International Monetary Fund |
| Total Pages | : 23 |
| Release | : 2012-06-01 |
| Genre | : Business & Economics |
| ISBN | : 1475514298 |
Download Threshold Effects of Sovereign Debt Book in PDF, Epub and Kindle
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.
| Author | : Mr.Alexander Chudik |
| Publisher | : International Monetary Fund |
| Total Pages | : 59 |
| Release | : 2015-09-08 |
| Genre | : Business & Economics |
| ISBN | : 1513513354 |
Download Is There a Debt-threshold Effect on Output Growth? Book in PDF, Epub and Kindle
This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with cross-sectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965- 2010 period, we find no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers in the long run.
| Author | : Alexander Chudik |
| Publisher | : |
| Total Pages | : 34 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download Is There a Debt-Threshold Effect on Output Growth? Book in PDF, Epub and Kindle
This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with crosssectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965-2010 period, we find no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers.
| Author | : Jaejoon Woo |
| Publisher | : International Monetary Fund |
| Total Pages | : 49 |
| Release | : 2010-07-01 |
| Genre | : Business & Economics |
| ISBN | : 145520157X |
Download Public Debt and Growth Book in PDF, Epub and Kindle
This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of 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, with the impact being 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. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
| Author | : Pinar Topal |
| Publisher | : |
| Total Pages | : 28 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download Threshold Effects of Public Debt on Economic Growth in the Euro Area Economies Book in PDF, Epub and Kindle
This paper sheds new light on the growth implications of public debt introducing a dynamic panel threshold model by accounting for regime dependent intercepts and focusing on 12 Euro zone economies over the 1980-2012 period. The threshold estimates for debt are estimated by using multiple threshold model advancing on Hansen (1999), Caner and Hansen (2004) and Bick (2010). The empirical results confirm the evidence for double threshold model. The estimated threshold values are 71.66% and 80.21%. The impact of debt on GDP growth is positive and highly significant whenever debt ratio is below 71.66%. This impact changes its direction and strength once debt ratio exceeds the first threshold value. Between 71.66% and 80.21%, debt ratio has negative impact on economic outcome. And above 80.21%, the impact remains negative but loses its strength. The decreasing negative relationship can be explained with the non-Keynesian impact of fiscal consolidation. The results also emphasize the role of regime dependent intercept. The exclusion of regime dependent intercept from the threshold model decreases the threshold value to around 39% and widens the 95% confidence interval substantially. In the absence of regime dependent intercept, debt ratio below the threshold value has wrong sign and loses its statistically significant impact on the economic growth. Thus, ignoring regime dependent intercepts may lead to biased estimates of the thresholds and the marginal impacts.
| Author | : Kevin Greenidge |
| Publisher | : International Monetary Fund |
| Total Pages | : 23 |
| Release | : 2012-06-01 |
| Genre | : Business & Economics |
| ISBN | : 1475504500 |
Download Threshold Effects of Sovereign Debt Book in PDF, Epub and Kindle
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.
| Author | : Mr.Andrea Pescatori |
| Publisher | : International Monetary Fund |
| Total Pages | : 19 |
| Release | : 2014-02-13 |
| Genre | : Business & Economics |
| ISBN | : 1484306449 |
Download Debt and Growth Book in PDF, Epub and Kindle
Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, we find no evidence of any particular debt threshold above which medium-term growth prospects are dramatically compromised. Furthermore, we find the debt trajectory can be as important as the debt level in understanding future growth prospects, since countries with high but declining debt appear to grow equally as fast as countries with lower debt. Notwithstanding this, we find some evidence that higher debt is associated with a higher degree of output volatility.
| Author | : Jaejoon Woo |
| Publisher | : International Monetary Fund |
| Total Pages | : 48 |
| Release | : 2010-07-01 |
| Genre | : Business & Economics |
| ISBN | : 1455201855 |
Download Public Debt and Growth Book in PDF, Epub and Kindle
This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of 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, with the impact being 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. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
| Author | : Balász Égert |
| Publisher | : |
| Total Pages | : 31 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download The 90% Public Debt Threshold Book in PDF, Epub and Kindle
| Author | : Alfred Greiner |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 148 |
| Release | : 2009-07-24 |
| Genre | : Business & Economics |
| ISBN | : 3642017452 |
Download Public Debt and Economic Growth Book in PDF, Epub and Kindle
Starting point of this book is the observation that an increase in public debt must be accompanied by a rise in the primary surplus of the government to guarantee sustainability of public debt. The book first elaborates on that principle from a theoretical point of view and then tests whether empirical evidence for that rule can be found. Additional tests are implemented to gain further evidence on sustainability of public debt. In order to allow for time varying coefficients penalized spline estimations are performed. The theoretical chapters present endogenous growth models and assume that the primary surplus rises as public debt increases so that sustainability of public debt is given. Implications of public deficits and debt are studied assuming full employment and for unemployment. The conclusion summarizes the findings and compares the results of the different models. Finally, policy implications are given showing how governments should deal with high public debt to GDP ratios.
