IDEAS home Printed from https://ideas.repec.org/a/gam/jecnmx/v12y2024i1p7-d1351480.html
   My bibliography  Save this article

Public Debt and Economic Growth: A Panel Kink Regression Latent Group Structures Approach

Author

Listed:
  • Chaoyi Chen

    (Magyar Nemzeti Bank (Central Bank of Hungary), 1054 Budapest, Hungary
    MNB Institute, John von Neumann University, 6000 Kecskemét, Hungary)

  • Thanasis Stengos

    (Department of Economics and Finance, University of Guelph, Guelph, ON N1G 2W1, Canada)

  • Jianhan Zhang

    (Department of Economics and Finance, University of Guelph, Guelph, ON N1G 2W1, Canada)

Abstract

This paper investigates the relationship between public debt and economic growth in the context of a panel kink regression with latent group structures. The proposed model allows us to explore the heterogeneous threshold effects of public debt on economic growth based on unknown group patterns. We propose a least squares estimator and demonstrate the consistency of estimating group structures. The finite sample performance of the proposed estimator is evaluated by simulations. Our findings reveal that the nonlinear relationship between public debt and economic growth is characterized by a heterogeneous threshold level, which varies among different groups, and highlight that the mixed results found in previous studies may stem from the assumption of a homogeneous threshold effect.

Suggested Citation

  • Chaoyi Chen & Thanasis Stengos & Jianhan Zhang, 2024. "Public Debt and Economic Growth: A Panel Kink Regression Latent Group Structures Approach," Econometrics, MDPI, vol. 12(1), pages 1-19, March.
    • Handle: RePEc:gam:jecnmx:v:12:y:2024:i:1:p:7-:d:1351480
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2225-1146/12/1/7/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2225-1146/12/1/7/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Afonso, António & Jalles, João Tovar, 2013. "Growth and productivity: The role of government debt," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 384-407.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saungweme, Talknice & Odhiambo, Nicholas M., 2020. "The Impact of Domestic and Foreign Public Debt on Economic Growth: Empirical Evidence from Zimbabwe," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 77-106.
    2. Saungweme, Talknice & Odhiambo, Nicholas M, 2019. "Relative impact of domestic and foreign public debt on economic growth in South Africa," Working Papers 25664, University of South Africa, Department of Economics.
    3. Jaramillo, Laura & Weber, Anke, 2013. "Bond yields in emerging economies: It matters what state you are in," Emerging Markets Review, Elsevier, vol. 17(C), pages 169-185.
    4. Makin, Anthony J. & Layton, Allan, 2021. "The global fiscal response to COVID-19: Risks and repercussions," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 340-349.
    5. Ugo Panizza & Andrea F. Presbitero, 2013. "Public Debt and Economic Growth in Advanced Economies: A Survey," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 175-204, June.
    6. Coccia, Mario, 2017. "Asymmetric paths of public debts and of general government deficits across countries within and outside the European monetary unification and economic policy of debt dissolution," The Journal of Economic Asymmetries, Elsevier, vol. 15(C), pages 17-31.
    7. Tarek Bouazizi & Zouhaier Hadhek & Mongi Lassoued, 2020. "General Government Balance Shocks and Their Impact on Some Tunisian Macroeconomics Variables: Evidence from a VAR Model," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 69-83.
    8. Mario Coccia, 2018. "National debts and government deficits within European Monetary Union: Statistical evidence of economic issues," Papers 1806.07830, arXiv.org.
    9. Albulena Mustafa Zatriqi & Safet Merovci & Rahmije Topxhiu, 2017. "Trends and Characteristics of the Securities Issued by the Government of Kosovo," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 251-264, June.
    10. João Basilio Pereima & Manuela Merki & Fernando Motta Correia, 2016. "Economic Growth And Public Debt: Addressing Unobserved Heterogeneity," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 101, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. Nikolay Velichkov, 2016. "Effects of Government Debt on Macroeconomic Activity (The Case of Bulgaria)," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 24-32, March.
    12. Reiner Eichenberger & David Stadelmann, 2009. "Consequences of Debt Capitalization: Property Ownership and Debt/Tax Choice," CREMA Working Paper Series 2009-08, Center for Research in Economics, Management and the Arts (CREMA).
    13. Francisco Alvarez-Cuadrado & Ngo Van Long, 2012. "Envy and Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 949-973, September.
    14. Roozbeh Hosseini & Larry E. Jones & Ali Shourideh, 2009. "Risk Sharing, Inequality and Fertility," NBER Working Papers 15111, National Bureau of Economic Research, Inc.
    15. Xinshen DIAO & Terry L. ROE & A. Erinç YELDAN, 1999. "How Fiscal Mismanagement May Impede Trade Reform: Lessons From An Intertemporal, Multi-Sector General Equilibrium Model For Turkey," The Developing Economies, Institute of Developing Economies, vol. 37(1), pages 59-88, March.
    16. Fernando Broner & Daragh Clancy & Aitor Erce & Alberto Martin, 2022. "Fiscal Multipliers and Foreign Holdings of Public Debt," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(3), pages 1155-1204.
    17. Mengyuan Zhou, 2022. "Does the Source of Inheritance Matter in Bequest Attitudes? Evidence from Japan," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 867-887, December.
    18. Markku Ollikainen, 1998. "Sustainable Forestry: Timber Bequests, Future Generations and Optimal Tax Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(3), pages 255-273, October.
    19. Herrera, Santiago, 2000. "Determinantes y composición del endeudamiento público en Colombia," IDB Publications (Working Papers) 2110, Inter-American Development Bank.
    20. Schreiner, Lena & Madlener, Reinhard, 2022. "Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany," Energy Economics, Elsevier, vol. 107(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecnmx:v:12:y:2024:i:1:p:7-:d:1351480. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.