Total Public Debt and Growth in Developing Countries

23 Pages Posted: 8 Apr 2011

See all articles by Andrea Filippo Presbitero

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics; Centre for Macroeconomics & Finance Research (CeMaFiR)

Date Written: November 12, 2010

Abstract

The global crisis and the expansionary government reaction in many countries has revamped the attention of policy makers and academics on the growth effects of large public debts. Recent empirical studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.

Keywords: Domestic debt, Public debt, growth

JEL Classification: F33, F34, F35, O11

Suggested Citation

Presbitero, Andrea Filippo, Total Public Debt and Growth in Developing Countries (November 12, 2010). Centro Studi Luca d'Agliano Development Studies Working Paper No. 300. Available at SSRN: https://ssrn.com/abstract=1804958 or http://dx.doi.org/10.2139/ssrn.1804958

Andrea Filippo Presbitero (Contact Author)

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli, 8
Ancona, AN 60121
Italy
+39 0712207074 (Phone)

HOME PAGE: http://sites.google.com/site/presbitero/

Centre for Macroeconomics & Finance Research (CeMaFiR) ( email )

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