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Preprints, Working Papers, ... (Working Paper) Year : 2012

Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities

Abstract

In their already-famous 2010 article "Growth-in-a-Time-of-Debt" (AER-100(2)-pp.-573-78), Carmen Reinhart and Kenneth Rogoff show that average post-WW2 economic growth is dramatically declining in advanced economies, once the debt-to-GDP ratio is above a 90% threshold. We explore the relevance of this exogenous threshold using up-to-date econometric techniques, and reveal an endogenously-estimated threshold around a debt-to-GDP ratio of 115%, above which the negative debt-growth link changes sign. Consequently, additional evidence is needed before suggesting policy recommendations regarding growth effects of fiscal policy in such high debt regimes, which may be subject to complex nonlinearities.
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halshs-00700471 , version 1 (23-05-2012)

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Alexandru Minea, Antoine Parent. Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities. 2012. ⟨halshs-00700471⟩
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