Public debt - economic growth nexus in emerging and developing economies: Exploring nonlinearity

Abstract

This paper explores the nonlinear dynamics between public debt and economic growth by estimating the threshold level of debt for thirty-nine emerging and developing economies. The study found a considerable variation amongst the debt thresholds in these countries, ranging between 24 and 132 per cent. We observed the evidence for an inverted U-shape relationship either partially or fully only in six countries. On the contrary, our study found that expanding debt even beyond the threshold promotes economic growth in some countries, while debt hinders growth even at low debt levels in a few countries.