Is There any Government Debt Threshold in Four Selected Central European Countries?
Government Debt Threshold in Four Selected Central European Countries
Keywords:
fiscal policy, government debt, Reinhart-Rogoff hypothesis, debt threshold
Abstract
Based on an extended production function, this paper finds that there is no government debt threshold in Hungary and Slovakia and that the respective government debt thresholds in Czechia and Poland are estimated to be 27.51% and 46.86%, which are far less than the 90% threshold proposed by Reinhart and Rogoff. Therefore, the Reinhart-Rogoff hypothesis does not apply to Czechia, Hungary, Poland, and Slovakia.
References
Afonso, A., & Jalles, J. T. (2013). Growth and productivity: The role of government debt. International Review of Economics and Finance, 25(Issue C), 384–407.
Baum, A., Checherita-Westphal, C., & Rother, P. (2013). Debt and growth: New evidence for the euro area. Journal of International Money and Finance, 32, 809-821.
Cecchetti, S. G., Mohanty, M.S., & Zampolli, F. (2011). The real effects of debt. Bank for International Settlements. Bis Working Papers No. 352.
Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56(7), 1392-1405.
Chirwa, T. G. (2017). Public debt and economic growth nexus in the Euro area: A dynamic panel ARDL approach.
Égert, B. (2015a). The 90% public debt threshold: the rise and fall of a stylized fact” Applied Economics, 47, 3756-3770.
Égert, B. (2015b). Public debt, economic growth and nonlinear effects: Myth or reality? Journal of Macroeconomics, 43, 226-238.
Goel, R. K., Payne, J. E., & Ram, R. (2008). R&D expenditures and US economic growth: A disaggregated approach. Journal of Policy Modeling, 30(2), 237-250.
Herndon, T., Ash, M., & Pollin, R. (2014). Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge Journal of Economics, 38(2), 257-279.
Hsing, Y. (2018). Test of a quadratic relationship between aggregate output and government debt in Hungary. The European Journal of Applied Economics, 15(1), 38-45.
Jacobs, J., Ogawa, K., Sterken, E., & Tokutsu, I. (2020). Public debt, economic growth and the real interest rate: A panel VAR Approach to EU and OECD countries. Applied Economics, 52(12), 1377-1394.
Lechtenberg, L. (2017). The debt-to-GDP threshold effect on output: A country specific analysis. Aisthesis, the Interdisciplinary Honors Journal, 8 (1), 26-34.
Lee, S., Park, H., Seo, M. H., & Shin, Y. (2017) Testing for a debt‐threshold effect on output growth. Fiscal studies, 38, 701-717.
Minea, A., & Parent, A. (2012). Is high public debt always harmful to economic growth? Reinhart and Rogoff and some complex nonlinearities. Working paper.
Ram, R. (1986). Government size and economic growth: A new framework and some evidence from cross-section and time-series data. The American Economic Review, 76(1), 191-203.
Ram, R. (1989). Government size and economic growth: A new framework and some evidence from cross-section and time-series data: Reply. The American Economic Review, 79(1), 281-284.
Reinhart, C. M., & Rogoff, K. S. (2010a). Growth in a time of debt. American Economic Review, 100(2), 573-78.
Reinhart, C. M., & Rogoff, K. S. (2010b). Debt and growth revisited. (MPRA Paper No. 24376). Munich: Munich University Library.
Swamy, V. (2020). Debt and growth: Decomposing the cause and effect relationship. International Journal of Finance & Economics, 25, 141-156.
Woo, J., & Kumar, M. S. (2015). Public debt and growth. Economica, 82(328), 705-739.
Baum, A., Checherita-Westphal, C., & Rother, P. (2013). Debt and growth: New evidence for the euro area. Journal of International Money and Finance, 32, 809-821.
Cecchetti, S. G., Mohanty, M.S., & Zampolli, F. (2011). The real effects of debt. Bank for International Settlements. Bis Working Papers No. 352.
Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56(7), 1392-1405.
Chirwa, T. G. (2017). Public debt and economic growth nexus in the Euro area: A dynamic panel ARDL approach.
Égert, B. (2015a). The 90% public debt threshold: the rise and fall of a stylized fact” Applied Economics, 47, 3756-3770.
Égert, B. (2015b). Public debt, economic growth and nonlinear effects: Myth or reality? Journal of Macroeconomics, 43, 226-238.
Goel, R. K., Payne, J. E., & Ram, R. (2008). R&D expenditures and US economic growth: A disaggregated approach. Journal of Policy Modeling, 30(2), 237-250.
Herndon, T., Ash, M., & Pollin, R. (2014). Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge Journal of Economics, 38(2), 257-279.
Hsing, Y. (2018). Test of a quadratic relationship between aggregate output and government debt in Hungary. The European Journal of Applied Economics, 15(1), 38-45.
Jacobs, J., Ogawa, K., Sterken, E., & Tokutsu, I. (2020). Public debt, economic growth and the real interest rate: A panel VAR Approach to EU and OECD countries. Applied Economics, 52(12), 1377-1394.
Lechtenberg, L. (2017). The debt-to-GDP threshold effect on output: A country specific analysis. Aisthesis, the Interdisciplinary Honors Journal, 8 (1), 26-34.
Lee, S., Park, H., Seo, M. H., & Shin, Y. (2017) Testing for a debt‐threshold effect on output growth. Fiscal studies, 38, 701-717.
Minea, A., & Parent, A. (2012). Is high public debt always harmful to economic growth? Reinhart and Rogoff and some complex nonlinearities. Working paper.
Ram, R. (1986). Government size and economic growth: A new framework and some evidence from cross-section and time-series data. The American Economic Review, 76(1), 191-203.
Ram, R. (1989). Government size and economic growth: A new framework and some evidence from cross-section and time-series data: Reply. The American Economic Review, 79(1), 281-284.
Reinhart, C. M., & Rogoff, K. S. (2010a). Growth in a time of debt. American Economic Review, 100(2), 573-78.
Reinhart, C. M., & Rogoff, K. S. (2010b). Debt and growth revisited. (MPRA Paper No. 24376). Munich: Munich University Library.
Swamy, V. (2020). Debt and growth: Decomposing the cause and effect relationship. International Journal of Finance & Economics, 25, 141-156.
Woo, J., & Kumar, M. S. (2015). Public debt and growth. Economica, 82(328), 705-739.
Published
2021/04/08
Section
Original Scientific Paper
