How Does Institutional Quality Shape the Impact of Public Debt on Economic Growth? A Threshold Panel Analysis Over Eu-28 PDF Download
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Author: Gianluigi De Pascale
Publisher:
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Languages : en
Pages : 0
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The relationship between public debt and economic growth is one of the cornerstones of the European integration. However, the role of institutional quality in moderating the negative impact of public debt on economic growth the EU area remains unclear. This paper investigates the impact of public debt on economic growth in the EU-28 countries over 1996-2019 by running a threshold dynamic panel estimator. Results show that an inverted U-shaped non-linearity holds when arranging the debt-to-GDP ratio as a threshold. Moreover, there is evidence that a high level of institutional quality moderates the negative impact of public debt on economic performance.
Author: Gianluigi De Pascale
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The relationship between public debt and economic growth is one of the cornerstones of the European integration. However, the role of institutional quality in moderating the negative impact of public debt on economic growth the EU area remains unclear. This paper investigates the impact of public debt on economic growth in the EU-28 countries over 1996-2019 by running a threshold dynamic panel estimator. Results show that an inverted U-shaped non-linearity holds when arranging the debt-to-GDP ratio as a threshold. Moreover, there is evidence that a high level of institutional quality moderates the negative impact of public debt on economic performance.
Author: Mr.Alexander Chudik
Publisher: International Monetary Fund
ISBN: 1513513354
Category : Business & Economics
Languages : en
Pages : 59
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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: Pinar Topal
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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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:
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Category :
Languages : en
Pages :
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Author: Jaejoon Woo
Publisher: International Monetary Fund
ISBN: 145520157X
Category : Business & Economics
Languages : en
Pages : 49
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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: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498342434
Category : Business & Economics
Languages : en
Pages : 88
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This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal authorities to help manage the risks and enhance crisis preparedness.
Author: National Intelligence Council
Publisher: Cosimo Reports
ISBN: 9781646794973
Category :
Languages : en
Pages : 158
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"The ongoing COVID-19 pandemic marks the most significant, singular global disruption since World War II, with health, economic, political, and security implications that will ripple for years to come." -Global Trends 2040 (2021) Global Trends 2040-A More Contested World (2021), released by the US National Intelligence Council, is the latest report in its series of reports starting in 1997 about megatrends and the world's future. This report, strongly influenced by the COVID-19 pandemic, paints a bleak picture of the future and describes a contested, fragmented and turbulent world. It specifically discusses the four main trends that will shape tomorrow's world: - Demographics-by 2040, 1.4 billion people will be added mostly in Africa and South Asia. - Economics-increased government debt and concentrated economic power will escalate problems for the poor and middleclass. - Climate-a hotter world will increase water, food, and health insecurity. - Technology-the emergence of new technologies could both solve and cause problems for human life. Students of trends, policymakers, entrepreneurs, academics, journalists and anyone eager for a glimpse into the next decades, will find this report, with colored graphs, essential reading.
Author: M. Ayhan Kose
Publisher: World Bank Publications
ISBN: 1464815453
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
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.
Author: Mr.Ari Aisen
Publisher: International Monetary Fund
ISBN: 1455211907
Category : Business & Economics
Languages : en
Pages : 30
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The purpose of this paper is to empirically determine the effects of political instability on economic growth. Using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of GDP per capita. Regarding the channels of transmission, we find that political instability adversely affects growth by lowering the rates of productivity growth and, to a smaller degree, physical and human capital accumulation. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a small negative effect.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 149832892X
Category : Business & Economics
Languages : en
Pages : 39
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