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Public Debt and Economic Growth: A Review of Contemporary Literature
TLDR
This article reviewed the most important contributions to literature on "public debt - economic growth" relationship and suggested that policy makers and investors should reconsider not only the so-called 90% threshold hypothesis but also the causality itself, because there is no necessary theoretical consensus so far.Abstract:
This article reviews the most important contributions to literature on "public debt - economic growth" relationship. Most relevant studies are empirical. Some of them are based on causality tests, albeit with no clear conclusion as to what the causes and what the effects are. We also indicate important gaps, which have not been considered and these are either periods of economic crises or "secular stagnation" phenomena. We suggest that policy makers and investors should reconsider not only the so-called 90% "threshold hypothesis" but also the causality itself, because there is no necessary theoretical consensus so far.read more
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Journal ArticleDOI
Growth in a time of debt
Carmen Reinhart,Kenneth Rogoff +1 more
TL;DR: This paper study the relationship between government debt and real GDP growth and find that the relationship is weak for debt/GDP ratios below a threshold of 90 percent of GDP, while for higher levels, growth rates are roughly cut in half.
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Growth Dynamics: The Myth of Economic Recovery
TL;DR: Acemoglu et al. as mentioned in this paper studied the impact of financial and political shocks on output in a broad set of countries, particularly whether output losses are recovered from financial or political shocks.
Journal ArticleDOI
Fiscal Policy in a Depressed Economy
TL;DR: In a depressed economy, with short-term nominal interest rates at their zero lower bound, ample cyclical unemployment, and excess capacity, increased government purchases would be neither offset by the monetary authority raising interest rates nor neutralized by supply-side bottlenecks.
Journal Article
The real effects of debt
Stephen G. Cecchetti,Stephen G. Cecchetti,Stephen G. Cecchetti,Madhusudan Mohanty,Fabrizio Zampolli +4 more
TL;DR: In this paper, the authors used a new dataset that includes the level of government, non-financial corporate and household debt in 18 OECD countries from 1980 to 2010, and found that, beyond a certain level, debt is a drag on growth.
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The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area
TL;DR: In this paper, the average impact of government debt on per-capita GDP growth in twelve euro area countries over a period of about 40 years starting in 1970 was investigated, and the authors found a non-linear impact of debt on growth with a turning point, beyond which the government debt-to-GDP ratio has a negative impact on long-term growth.