The effect of public debt on growth in multiple regimes
Ημερομηνία
2013Source
Journal of MacroeconomicsVolume
38Pages
35-43Google Scholar check
Keyword(s):
Metadata
Εμφάνιση πλήρους εγγραφήςΕπιτομή
We employ a structural threshold regression methodology to investigate the heterogeneous effects of debt on growth using public debt as a threshold variable as well as several other plausible variables. Our methodology allows us to address parameter heterogeneity that characterizes cross-country growth data and at the same time account for endogeneity. We find strong evidence for threshold effects based on democracy, which implies that higher public debt results in lower growth for countries in the Low-Democracy regime. Our results are consistent with the presence of parameter heterogeneity in the cross-country growth process due to fundamental determinants of economic growth proposed by the new growth theories. © 2013 Elsevier Inc.