Debt and Growth: Is There a Magic Threshold?

Pescatori, Andrea; Sandri, Damiano; Simon, John

doi:10.5089/9781484306444.001

Cited by 126 publications

(85 citation statements)

References 7 publications

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“…On the other hand, Panizza and Presbitero (2014) do not find that public debt causes economic growth and they conclude that there is no evidence that high levels of public debt have a negative impact on economic growth in the medium-term for advanced economies. Moreover, Pescatori et al (2014) indicate that the link between the two variables (public debt and economic growth) is notably influenced by the debt trajectory.…”

Section: Introductionmentioning

confidence: 99%

What happens to the relationship between public debt and economic growth in European countries?

Jiménez‐Rodríguez

Rodríguez-López²

2015

Econom. bus. letters

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The importance of public debt level is mainly related with its impact on economic growth. We analyze the relationship between public debt and economic growth in the core and periphery European countries. We find that higher levels of debt-to-GDP ratio have a negative impact on economic growth in all countries, with Belgium and Ireland being the most affected economies in each type of countries. Moreover, we obtain that economic growth reduces debt-to-GDP ratio and, consequently, economic growth is essential to reduce public debt and improves the general economic situation.

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Section: Introductionmentioning

confidence: 99%

What happens to the relationship between public debt and economic growth in European countries?

Jiménez‐Rodríguez

Rodríguez-López²

2015

Econom. bus. letters

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“…Cecchetti et al (2011) suggested that household debt beyond a threshold of 85 percent of the gross domestic product (GDP) could be damaging to an economy. Pescatori, Sandri and Simon (2014) believe that there is no magic threshold, and found that the level of debt alone is an inadequate predictor of future growth, but that its trajectory is important.…”

Section: Introductionmentioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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DeclarationBy submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification.This dissertation includes two published and one accepted but not yet published original papers in peer-reviewed international journals. The fourth paper representing chapter eight is ready for submission for peer review. The development and writing of the papers (published and unpublished) were the principal responsibility of myself and, for each of the cases where this is not the case, a declaration is included in the dissertation indicating the nature and extent of the contributions of co-authors. AbstractGlobal household indebtedness has reached unprecedented levels over the past few decades.The household sector has had to cope with significant losses in income and wealth as well as the burden of debt service since the beginning of the financial crisis. Research focus on this phenomenon, together with its social implications, has grown. This study uses the National Income Dynamics Study (NIDS) data to empirically investigate the effects of household debt on multidimensional poverty. This was achieved through four independent research papers meant to address different angles of the subject. Chapter 5 provides a snapshot of the prevalence of over-indebtedness, using various international indicators and the National Credit Regulator (NCR) indicator, and describes which households are over-indebted. A total of eight percent of South African households are overindebted, and 61.4 percent of those households are found in the lowest income category (R0 -R2 000), spending more than 45 percent of their household income on debt repayments, which is beyond levels that are considered sustainable. The alarming revelation is that, according to the unsecured debt indicator, 15.2 percent of households are over-indebted, while 11 percent of households are driven below the relative income poverty line after making debt repayments. Stellenbosch University https://scholar.sun.ac.za 3The racial distribution indicates that households headed by Africans are overrepresented (79%).Most over-indebted households are found amongst those who own their places of residence (78.6%), do not receive government grants (71.7%), are male (53.8%), and have an unemployed household head (53.5%).Chapter 6 examines the presence of thresholds in the debt-poverty nexus at micro level, i.e. the tipping point above which debt is associated with more multidimensional poverty. By applying the Generalised Additive Model (GAM) using regression splines, the study finds the existence of critical tipping points between household debt service-to-income ratio and multidimensional poverty along with other explanatory variables (age...

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“…Afonso and Jalles (2013) pointed out errors in the Reinhart-Rogoff estimation methodology. Pescatori et al (2014) developed econometric models to test the existence of a threshold debt level. More importantly, Jonh Irons and Josh Bivens (2010) have studied the United States economy data and argued that there's no compelling reason to state that the GITD "90% threshold" for gross government debt would lead to a slower growth, and hence should not be used as a guideline for U.S. fiscal However, few empirical study on government debt and economic growth in China has been reported, in particular regard to the LGD.…”

Section: Literature Reviewmentioning

confidence: 99%

Will Rising Debt in China Lead to a Hard Landing?

Cang¹,

Matt²

2017

IJEF

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Moody has recently downgraded China's sovereign debt, which's Moody's first downgrade for the country since 1989. The objective of this study is to get an insight into the local and regional government debt in China, analyze the key factors, and evaluate the economic risks. Based on the published data since 1996, the granger causality test is performed to find out the relationship between local government debt level, the fiscal income, GDP growth rate and CPI. Some major findings are: i) local government debt is accumulated through more spending on economic development and less funding obtained from the revenue sharing scheme between governments. ii) fiscal income and GDP growth rate have positive impact on the increase of local government debt. iii) CPI increase shows negative impact on the local government debt. It's projected that in the coming years, slower growth and less income with a stable CPI could slow down debt accumulation. The Chinese government should monitor the risk factors closely and use risk mitigation tools to avoid a hard landing.

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Debt and Growth: Is There a Magic Threshold?

Cited by 126 publications

References 7 publications

What happens to the relationship between public debt and economic growth in European countries?

What happens to the relationship between public debt and economic growth in European countries?

The threshold effects of household indebtedness on multidimensional poverty

Will Rising Debt in China Lead to a Hard Landing?

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