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Nonlinear Analysis of Economic Growth, Public Debt and Policy Tools

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  • Yifei Cai

Abstract

This paper empirically analyzes the nonlinear relation between real GDP growth per capital and public debt by employing ADL test for threshold cointegration method. Empirical results show that there exists a threshold cointegration relationship between public debt and real GDP growth per capital. In case of the empirical results, cutting public debt could boost economic growth in the long-term. However, the short term variation of public debt makes little impact on real output per capital. Comparatively speaking, human capital and investment rate and trade openness make larger influence on real GDP growth per capital. From the perspective of economic policy, the government should take full advantage of the fiscal policy to cut public debt with the operation space of monetary policy being compressed.

Suggested Citation

  • Yifei Cai, 2017. "Nonlinear Analysis of Economic Growth, Public Debt and Policy Tools," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(1), pages 99-108.
    • Handle: RePEc:asi:aeafrj:v:7:y:2017:i:1:p:99-108:id:1542
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    Cited by:

    1. Constantinos Challoumis, 2021. "Index of the Cycle of Money - The Case of Greece," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 14(2), pages 58-67, September.
    2. Teboho Jeremiah Mosikari & Joel Hinaunye Eita, 2021. "Asymmetric effect of government debt on GDP growth: evidence from Namibia," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 543-558.
    3. Yang Li & Hu WenXiu & Su ZhenXing, 2023. "Impact of Local Official Corruption on Local Government Debt in China: The Mediating Role of Government Investment Efficiency," SAGE Open, , vol. 13(3), pages 21582440231, July.

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