Nonlinearities in the relationship between debt and growth: (no) evidence from over two centuries

Eberhardt, Markus

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 recognises 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 co-summability 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.

Citation

Eberhardt, M. (in press). Nonlinearities in the relationship between debt and growth: (no) evidence from over two centuries. Macroeconomic Dynamics, https://doi.org/10.1017/S1365100517000347

• Journal Article Type: Article
• Acceptance Date: Mar 28, 2017
• Online Publication Date: Sep 18, 2017
• Deposit Date: Sep 13, 2017
• Publicly Available Date: Sep 18, 2017
• Journal: Macroeconomic Dynamics
• Print ISSN: 1365-1005
• Electronic ISSN: 1469-8056
• Publisher: Cambridge University Press
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1017/S1365100517000347
• Keywords: public debt; economic growth; nonlinearity; summability and co-summability
• Public URL: https://nottingham-repository.worktribe.com/output/883423
• Publisher URL: https://www.cambridge.org/core/journals/macroeconomic-dynamics/article/nonlinearities-in-the-relationship-between-debt-and-growth-no-evidence-from-over-two-centuries/6BC40BD1F48C0301D74366B65E91DD23
• Contract Date: Sep 13, 2017