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Debt and growth: A non-parametric approach

Author

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  • Brida, Juan Gabriel
  • Gómez, David Matesanz
  • Seijas, Maria Nela

Abstract

In this study, we explore the dynamic relationship between public debt and economic growth by using a non-parametric approach based on data symbolization and clustering methods. The study uses annual data of general government consolidated gross debt-to-GDP ratio and gross domestic product for sixteen countries between 1977 and 2015. Using symbolic sequences, we introduce a notion of distance between the dynamical paths of different countries. Then, a Minimal Spanning Tree and a Hierarchical Tree are constructed from time series to help detecting the existence of groups of countries sharing similar economic performance. The main finding of the study appears for the period 2008–2016 when several countries surpassed the 90% debt-to-GDP threshold. During this period, three groups (clubs) of countries are obtained: high, mid and low indebted countries, suggesting that the employed debt-to-GDP threshold drives economic dynamics for the selected countries.

Suggested Citation

  • Brida, Juan Gabriel & Gómez, David Matesanz & Seijas, Maria Nela, 2017. "Debt and growth: A non-parametric approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 486(C), pages 883-894.
    • Handle: RePEc:eee:phsmap:v:486:y:2017:i:c:p:883-894
    DOI: 10.1016/j.physa.2017.05.060
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    Cited by:

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    3. Yilmaz BAYAR & Mahmut Unsal SASMAZ, 2019. "Foreign borrowing, foreign direct investment inflows and economic growth in European Union transition economies," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10, pages 107-125, December.
    4. Nur Hayati Abd Rahman & Shafinar Ismail & Khairunnisa Abd Samad & Bestari Dwi Handayani & Yozi Aulia Rahman & Wijang Sakitri, 2022. "The Effects of Regulatory Performance on the Debt–Growth Relationship: Cases of Upper-Middle-Income Economies," Economies, MDPI, vol. 10(10), pages 1-14, September.
    5. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.

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    More about this item

    Keywords

    Data symbolization; Minimum spanning tree; Multidimensional clustering methods; Debt–growth regimes; Public debt; Euro crisis;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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