Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/71161 
Authors: 
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper No. 4157
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper puts the Reinhart-Rogoff dataset to a formal econometric testing to see whether public debt has a negative nonlinear effect on growth if public debt exceeds 90% of GDP. Using nonlinear threshold models, we show that the negative nonlinear relationship between debt and growth is very sensitive to modelling choices. We also show that when nonlinearity is detected, the negative nonlinear effect kicks in at much lower levels of public debt (between 20% and 60% of GDP). These results, based on bivariate regressions on secular time series, are confirmed on a shorter dataset (1960-2010) using a multivariate growth framework.
Subjects: 
public debt
economic growth
nonlinearity
threshold effects
JEL: 
E60
F30
F40
N40
Document Type: 
Working Paper
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