Fiscal sustainability using growth-maximizing debt targets

Checherita‐Westphal, Cristina; Hallett, Andrew Hughes; Rother, Philipp

doi:10.1080/00036846.2013.861590

Cited by 112 publications

(61 citation statements)

References 14 publications

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“…6 With such a set-up, they show that the level of debt that maximizes economic growth is a function of the output elasticity of the capital stock. Checherita-Westphal, Hughes Hallett, and Rother (2012) use the model to estimate optimal debt ratios for various subsamples of OECD countries and find values that range between 43 and 63 percent of GDP. However, Greiner (2012) shows that the results of Checherita-Westphal, Hughes Hallett, and Rother (2012) are driven by their assumption that the deficit is equal to public investment at each point in time.…”

Section: Public Debt and Economic Growth: The Theorymentioning

confidence: 99%

“…Checherita-Westphal, Hughes Hallett, and Rother (2012) use the model to estimate optimal debt ratios for various subsamples of OECD countries and find values that range between 43 and 63 percent of GDP. However, Greiner (2012) shows that the results of Checherita-Westphal, Hughes Hallett, and Rother (2012) are driven by their assumption that the deficit is equal to public investment at each point in time. According to Greiner (2012), in such a set-up, debt is completely irrelevant and the non-linear relationship between debt and growth is given by the growth-maximizing tax rate.…”

Section: Public Debt and Economic Growth: The Theorymentioning

confidence: 99%

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Public debt and economic growth in advanced economies: A survey

Panizza

Presbitero

2013

Swiss J Economics Statistics

275

175

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Section: Public Debt and Economic Growth: The Theorymentioning

confidence: 99%

Section: Public Debt and Economic Growth: The Theorymentioning

confidence: 99%

Public debt and economic growth in advanced economies: A survey

Panizza

Presbitero

2013

Swiss J Economics Statistics

275

175

View full text Add to dashboard Cite

show abstract

“…Several authors tried to validate Reinhart and Rogoff's (2010) findings via growth regressions (e.g. Afonso and Jalles 2013;Baum et al 2013;Caner et al 2011;Checherita-Westphal et al 2014;Checherita and Rother 2012;Cecchetti et al 2011;Kumar and Woo 2010). All these studies detect threshold values, which, however, vary for OECD countries between 77 and 100 percent, while debt below these thresholds is shown to be either neutral or positive for growth.…”

Section: Introductionmentioning

confidence: 99%

Public debt and economic growth – economic systems matter

Ahlborn

Schweickert

2017

Int Econ Econ Policy

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Most studies on the relationship between public debt and economic growth implicitly assume homogeneous debt effects across their samples. We -in accordance with recent literature-challenge this view and state that there likely is a great deal of cross-country heterogeneity in that relationship. However, other than scholars assuming that all countries are different, we expect that clusters of countries differ. We identify three country clusters with distinct economic systems: Liberal (Anglo Saxon), Continental (Core EU members) and Nordic (Scandinavian). We argue that different degrees of fiscal uncertainty at comparable levels of public debt between those economic systems constitute a major source of heterogeneity in the debt-growth relationship. Our empirical evidence supports this assumption. Continental countries face more growth reducing public debt effects than especially Liberal countries. There, public debt apparently exerts neutral or even positive growth effects, while for Nordic countries a non-linear relationship is discovered, with negative debt effects kicking in at public debt values of around 60% of GDP.

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“…For both cases, these authors also find an inverted U-shaped relation between debt and growth, with the threshold of public debt being at 70-80 percent of GDP. In addition, Checherita-Westphal et al (2012) estimate regressions for various subsamples of OECD countries and find values for the threshold of the debt to GDP ratio that range between 43 and 63 percent of GDP 2 . Egert (2015) extends the time period of the sample in Reinhart and Rogoff back to 1790 and detects a small negative correlation between debt and growth.…”

Section: Introductionmentioning

confidence: 99%

On the relation between public debt and economic growth: an empirical investigation

Fincke

Greiner

2015

Econom. bus. letters

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In this paper we empirically study the relation between public debt and economic growth. We analyze how the public debt to GDP ratio at a certain point in time is cor-related with the GDP growth rate in the following period, where we consider a one-year time span, a three-year time interval and a five-years interval. Using panel data compris-ing seven developed countries from 1970-2012, we estimate a pooled regression model and a random effects model. We find some evidence for a significantly negative relation between debt and growth. Further, for most specifications this relationship does not seem to be characterized by non-linearities.

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Fiscal sustainability using growth-maximizing debt targets

Cited by 112 publications

References 14 publications

Public debt and economic growth in advanced economies: A survey

Public debt and economic growth in advanced economies: A survey

Public debt and economic growth – economic systems matter

On the relation between public debt and economic growth: an empirical investigation

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