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NONLINEARITIES IN THE RELATIONSHIP BETWEEN DEBT AND GROWTH: (NO) EVIDENCE FROM OVER TWO CENTURIES

Published online by Cambridge University Press:  18 September 2017

Markus Eberhardt
Markus Eberhardt*
Affiliation:
University of Nottingham
*
Address correspondence to: Markus Eberhardt, School of Economics, Sir Clive Granger Building, University of Nottingham, University Park, Nottingham NG7 2RD, UK; e-mail: markus.eberhardt@nottingham.ac.uk.
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Abstract

I revisit the popular concern over a nonlinearity or threshold in the relationship between public debt and growth employing long time series data from up to 27 countries. My empirical approach recognizes that standard time series arguments for long-run equilibrium relations between integrated variables (cointegration) break down in nonlinear specifications such as those predominantly applied in the existing debt–growth literature. Adopting the novel cosummability approach, my analysis overcomes these difficulties to find no evidence for a systematic long-run relationship between debt and growth in the bivariate and economic theory-based multivariate specifications popular in this literature.

Keywords

Public DebtEconomic GrowthNonlinearitySummability and Cosummability
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 4 , June 2019 , pp. 1563 - 1585
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

I am indebted to Vanessa Berenguer-Rico, Matei Demetrescu, Gerdie Everaert, and Andrea Presbitero for helpful comments and suggestions. Vanessa also kindly provided the Gauss code that forms the basis for the time series analysis carried out in Gauss. Comments and suggestions from two anonymous referees that helped to significantly improve the paper are also gratefully acknowledged. The usual disclaimers apply.

References

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