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ABSTRACT
Traditionally, a higher debt burden is expected to negatively affect the economic growth, although the empirical evidence is inconclusive. In this paper we have re-examined the debt-growth relationship for 32 emerging economies while considering possible nonlinear impact of debt on economic growth using a dynamic panel. Our results suggest that for emerging economics, a large debt if used efficiently, can lead to significant positive economic growth. This relationship remains unchanged even when we control for other macroeconomic variables. We have also identified three different threshold debt-GDP ratios for the one, two and three period lags of debt and found an asymmetric impact of debt between above-threshold and below-threshold countries.
Disclosure statement
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Notes
1. All variables are in their natural logarithms.
2. The sample period is chosen on the basis of availability of complete data. Years with missing or incomplete data are not included.
3. We explored the cross section regression analysis. The results are reported in Appendix. , A3, A4 summarizes the results that we obtained.
4. In the third period lagged value it is more of a single model as we got only one country above the threshold level.
Additional information
Notes on contributors
Chitrakalpa Sen
Dr. Subaran Roy completed his PhD in Economics from Louisiana State University. He also holds a Master’s Degree from Jawaharlal Nehru University in International Economics and a B.Sc. in Economics from Calcutta University. His research interests include but are not limited to economic growth, international finance, trade, weightless economy, technology diffusion and applied econometrics. His research applies leading-edge (empirical) methods to examine substantively important economic phenomena and has significantly contributed to the relevant literature through well recognized international peer-reviewed journals.
Dr. Chitrakalpa Sen is an Associate Professor in Economics at Jindal Global Business School. An economist by training, Sen holds a M.Sc. in Economics from the University of Calcutta and a PhD from West Bengal University of Technology. His area of research includes but is not limited to – high frequency financial market dynamics, green stocks and growth economics. He is a member of the Center for Research in Emerging Economies (CREE) at Jindal Global Business School, O. P Jindal Global University.