The 90% Public Debt Threshold: The Rise and Fall of a Stylised Fact
This paper puts the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), to a formal econometric test to pin down debt thresholds endogenously. We show that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, tha...
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| Format: | Elektronisch E-Book |
| Sprache: | English |
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Paris
OECD Publishing
2013
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| Schriftenreihe: | OECD Economics Department Working Papers
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| Online-Zugang: | Volltext |
| Zusammenfassung: | This paper puts the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), to a formal econometric test to pin down debt thresholds endogenously. We show that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, that a negative association between debt and growth may set in at debt levels as low as 20% of GDP. Further (and greater) thresholds may exist but their magnitude is highly uncertain. For general government debt (1960-2009), the threshold beyond which this negative relation kicks in is considerably higher at about 50%. Finally, individual country estimates reveal a large amount of cross-country heterogeneity. For some countries including the United States, a nonlinear negative link can be detected at about 30% of GDP. For others, the thresholds are surrounded by a great amount of uncertainty or no nonlinearities can be established. This instability may be a result of threshold effects changing over time within countries and depending on economic conditions, not captured in our estimations. Overall, our results can be seen as a formal econometric confirmation that the 90% public debt threshold is not in the Reinhart-Rogoff data. But our results also seem to suggest that public debt be associated with poor economic performance at fairly moderate public debt levels. If high debt results in low growth, an issue of causality that is not systematically examined in this paper, then this suggests rather low debt-GDP ratios would be appropriate. Furthermore, the absence of threshold effects or low estimated thresholds may not preclude the emergence of further threshold effects, especially as public debt levels are rising to unprecedentedly high levels |
| Beschreibung: | 1 Online-Ressource (30 Seiten) 21 x 29.7cm |
| DOI: | 10.1787/5k452kln1s6l-en |
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| 520 | |a This paper puts the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), to a formal econometric test to pin down debt thresholds endogenously. We show that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, that a negative association between debt and growth may set in at debt levels as low as 20% of GDP. Further (and greater) thresholds may exist but their magnitude is highly uncertain. For general government debt (1960-2009), the threshold beyond which this negative relation kicks in is considerably higher at about 50%. Finally, individual country estimates reveal a large amount of cross-country heterogeneity. For some countries including the United States, a nonlinear negative link can be detected at about 30% of GDP. For others, the thresholds are surrounded by a great amount of uncertainty or no nonlinearities can be established. This instability may be a result of threshold effects changing over time within countries and depending on economic conditions, not captured in our estimations. Overall, our results can be seen as a formal econometric confirmation that the 90% public debt threshold is not in the Reinhart-Rogoff data. But our results also seem to suggest that public debt be associated with poor economic performance at fairly moderate public debt levels. If high debt results in low growth, an issue of causality that is not systematically examined in this paper, then this suggests rather low debt-GDP ratios would be appropriate. Furthermore, the absence of threshold effects or low estimated thresholds may not preclude the emergence of further threshold effects, especially as public debt levels are rising to unprecedentedly high levels | ||
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| spelling | Égert, Balázs Verfasser aut The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact Balázs Égert = Le seuil de la dette publique à 90 % : L'ascension et la chute d'un fait stylisé / Balázs Égert Le seuil de la dette publique à 90 % Paris OECD Publishing 2013 1 Online-Ressource (30 Seiten) 21 x 29.7cm txt rdacontent c rdamedia cr rdacarrier OECD Economics Department Working Papers This paper puts the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), to a formal econometric test to pin down debt thresholds endogenously. We show that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, that a negative association between debt and growth may set in at debt levels as low as 20% of GDP. Further (and greater) thresholds may exist but their magnitude is highly uncertain. For general government debt (1960-2009), the threshold beyond which this negative relation kicks in is considerably higher at about 50%. Finally, individual country estimates reveal a large amount of cross-country heterogeneity. For some countries including the United States, a nonlinear negative link can be detected at about 30% of GDP. For others, the thresholds are surrounded by a great amount of uncertainty or no nonlinearities can be established. This instability may be a result of threshold effects changing over time within countries and depending on economic conditions, not captured in our estimations. Overall, our results can be seen as a formal econometric confirmation that the 90% public debt threshold is not in the Reinhart-Rogoff data. But our results also seem to suggest that public debt be associated with poor economic performance at fairly moderate public debt levels. If high debt results in low growth, an issue of causality that is not systematically examined in this paper, then this suggests rather low debt-GDP ratios would be appropriate. Furthermore, the absence of threshold effects or low estimated thresholds may not preclude the emergence of further threshold effects, especially as public debt levels are rising to unprecedentedly high levels Governance Economics https://doi.org/10.1787/5k452kln1s6l-en Verlag kostenfrei Volltext |
| spellingShingle | Égert, Balázs The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact Governance Economics |
| title | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact |
| title_alt | Le seuil de la dette publique à 90 % |
| title_auth | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact |
| title_exact_search | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact |
| title_exact_search_txtP | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact |
| title_full | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact Balázs Égert = Le seuil de la dette publique à 90 % : L'ascension et la chute d'un fait stylisé / Balázs Égert |
| title_fullStr | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact Balázs Égert = Le seuil de la dette publique à 90 % : L'ascension et la chute d'un fait stylisé / Balázs Égert |
| title_full_unstemmed | The 90% Public Debt Threshold The Rise and Fall of a Stylised Fact Balázs Égert = Le seuil de la dette publique à 90 % : L'ascension et la chute d'un fait stylisé / Balázs Égert |
| title_short | The 90% Public Debt Threshold |
| title_sort | the 90 public debt threshold the rise and fall of a stylised fact |
| title_sub | The Rise and Fall of a Stylised Fact |
| topic | Governance Economics |
| topic_facet | Governance Economics |
| url | https://doi.org/10.1787/5k452kln1s6l-en |
| work_keys_str_mv | AT egertbalazs the90publicdebtthresholdtheriseandfallofastylisedfact AT egertbalazs leseuildeladettepubliquea90 |