Growth Beyond The Debt Thresholds
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Growth Beyond The Debt Thresholds
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Author : Sine Kontbay
language : en
Publisher:
Release Date : 2013
Growth Beyond The Debt Thresholds written by Sine Kontbay and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Abstract: This empirical study has two objectives both of which are directly related to nonlinear effects of debt on growth: The main objective is to assess the levels of public debt-to-GDP and total external debt-to-GDP ratios above which economic growth is impaired. The second objective is to examine the debt overhang effects on the sources of growth. A large panel data set of developed and developing countries over the period of 1970-2009 is employed to estimate the threshold levels for public and total external debt. The dynamic panel threshold method developed by Kremer et. al (2010) is applied to debt-growth nexus for the first time to estimate the debt thresholds. The method estimates threshold values from the data rather than imposing arbitrary values to study the debt threshold effects as had been done in the literature until now. The level of public debt above which the growth starts being a burden is 69% for high income OECD countries, 47% for middle income countries and 30% for low income. The model is modified to distinguish between the marginal and average debt overhang effects on growth. For high income OECD countries, once public debt-to-GDP exceeds the threshold, each additional unit of public debt lowers growth rate significanlty by about 0.1 percentage point. In middle income countries, however, the public debt overhang effect is observed through a significant slow down in average growth rate rather than a marginal impact on growth. For external debt, the threshold is around 80% for high income OECD countries, 50% for middle income countries, and 70% for low income group. Once these thresholds are exceeded, all countries face with a considerable decrease in their growth rates but the impact of each additional unit of external debt above the threshold is not significant. Therefore, countries' trend-growth is not effected as they accumulate more external debt beyond the threshold. For both public and external debt, the negative realtionship between debt and growth is mostly due to the decrease in capital stock accumulation for high debt levels rather than TFP growth.
Government Debt And Economic Growth
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Author : Vighneswara Swamy
language : en
Publisher:
Release Date : 2015
Government Debt And Economic Growth written by Vighneswara Swamy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Threshold Effects Of Sovereign Debt
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Author : Kevin Greenidge
language : en
Publisher: International Monetary Fund
Release Date : 2012-06-01
Threshold Effects Of Sovereign Debt written by Kevin Greenidge and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-06-01 with Business & Economics categories.
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.
Debt Is Not Free
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Author : Ms.Marialuz Moreno Badia
language : en
Publisher: International Monetary Fund
Release Date : 2020-01-03
Debt Is Not Free written by Ms.Marialuz Moreno Badia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-01-03 with Business & Economics categories.
With public debt soaring across the world, a growing concern is whether current debt levels are a harbinger of fiscal crises, thereby restricting the policy space in a downturn. The empirical evidence to date is however inconclusive, and the true cost of debt may be overstated if interest rates remain low. To shed light into this debate, this paper re-examines the importance of public debt as a leading indicator of fiscal crises using machine learning techniques to account for complex interactions previously ignored in the literature. We find that public debt is the most important predictor of crises, showing strong non-linearities. Moreover, beyond certain debt levels, the likelihood of crises increases sharply regardless of the interest-growth differential. Our analysis also reveals that the interactions of public debt with inflation and external imbalances can be as important as debt levels. These results, while not necessarily implying causality, show governments should be wary of high public debt even when borrowing costs seem low.
Public Debt And Growth
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Author : Jaejoon Woo
language : en
Publisher: International Monetary Fund
Release Date : 2010-07-01
Public Debt And Growth written by Jaejoon Woo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-07-01 with Business & Economics categories.
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.
The 90 Public Debt Threshold
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Author : Balász Égert
language : en
Publisher:
Release Date : 2013
The 90 Public Debt Threshold written by Balász Égert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Global Waves Of Debt
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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-03
Global Waves Of Debt written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-03 with Business & Economics categories.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Finding The Tipping Point
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Author : Mehmet Caner
language : en
Publisher:
Release Date : 2010
Finding The Tipping Point written by Mehmet Caner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
Finding The Tipping Point When Sovereign Debt Turns Bad
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Author : Mehmet Caner
language : en
Publisher:
Release Date : 2017
Finding The Tipping Point When Sovereign Debt Turns Bad written by Mehmet Caner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth. Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time? The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 101 developing and developed economies spanning a time period from 1980 to 2008. The estimations establish a threshold of 77 percent public debt-to-GDP ratio. If debt is above this threshold, each additional percentage point of debt costs 0.017 percentage points of annual real growth. The effect is even more pronounced in emerging markets where the threshold is 64 percent debt-to-GDP ratio. In these countries, the loss in annual real growth with each additional percentage point in public debt amounts to 0.02 percentage points. The cumulative effect on real GDP could be substantial. Importantly, the estimations control for other variables that might impact growth, such as the initial level of per-capita-GDP.
The Real Effects Of Debt
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Author : Stephen G. Cecchetti
language : en
Publisher:
Release Date : 2011
The Real Effects Of Debt written by Stephen G. Cecchetti and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Corporate debt categories.
"At moderate levels, debt improves welfare and enhances growth. But high levels can be damaging. When does debt go from good to bad? We address this question using a new dataset that includes the level of government, non-financial corporate and household debt in 18 OECD countries from 1980 to 2010. Our results support the view that, beyond a certain level, debt is a drag on growth. For government debt, the threshold is around 85% of GDP. The immediate implication is that countries with high debt must act quickly and decisively to address their fiscal problems. The longer-term lesson is that, to build the fiscal buffer required to address extraordinary events, governments should keep debt well below the estimated thresholds. Our examination of ot er types of debt yields similar conclusions. When corporate debt goes beyond 90% of GDP, it becomes a drag on growth. And for household debt, we report a threshold around 85% of GDP, although the impact is very imprecisely estimated."- -Abstract.