Public Debt and Growth: An Assessment of Key Findings on Causality and Thresholds

Authors

Michael Ash, University of Massachusetts - AmherstFollow
Deepankar Basu, University of Massachusetts AmherstFollow
Arindrajit Dube, University of Massachusetts AmherstFollow

Working Paper Number

2017-10

Publication Date

2017

Abstract

We provide a comprehensive assessment of the relationship between public debt and GDP growth in the postwar advanced economies. We use the timing of changes in public debt and growth to account for endogeneity, and find little evidence of a negative relationship. Semi-parametric estimates do not indicate any threshold effects. Finally, we reconcile our results with four recent, influential papers that found a substantial negative relationship, especially when public debt exceeds 90 percent of GDP. These earlier results appear to derive mostly from peculiar parametric specifications of nonlinearities, or use of small samples which amplify the influence of outliers.

DOI

https://doi.org/10.7275/10065164

License

UMass Amherst Open Access Policy

Recommended Citation

Ash, Michael; Basu, Deepankar; and Dube, Arindrajit, "Public Debt and Growth: An Assessment of Key Findings on Causality and Thresholds" (2017). UMass Amherst Economics Working Papers. 226.
https://doi.org/10.7275/10065164