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Threshold Effect of Public Debt on Economic Growth: An Empirical Investigation for Selected North African Countries

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  • Wissem Khanfir

Abstract

In this paper, we examine the non-linear relationship between public debt and economic growth, using panel data for 4 North African countries (Tunisia, Algeria, Morocco and Egypt) from 2003 to 2012. Applying a Panel Threshold Regression (PTR) model proposed by Hansen (1999), we got empirical results indicating that public debt lower than 42,8% of GDP is positively effected by economic growth. However, beyond this threshold of public debt, this relationship becomes negative, which implies that public debt seems to reduce economic growth. Therefore, the policy implication is to address fiscal consolidation and reduce public debt so as to stimulate the economic growth of the 4 North African countries.

Suggested Citation

  • Wissem Khanfir, 2019. "Threshold Effect of Public Debt on Economic Growth: An Empirical Investigation for Selected North African Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 429-436, September.
    • Handle: RePEc:nwe:eajour:y:2019:i:3:p:429-436
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    Cited by:

    1. Mohammed Daher Alshammary & Zulkefly Abdul Karim & Norlin Khalid & Riayati Ahmad, 2020. "Debt-Growth Nexus in the MENA Region: Evidence from a Panel Threshold Analysis," Economies, MDPI, vol. 8(4), pages 1-12, November.
    2. TOGBENU, Fo-kossi Edem & Kadanga, Mayo Takémsi Norris, 2024. "Un réexamen de l’effet de seuil de la dette publique sur la croissance économique en Afrique subsaharienne [A reevaluation of the threshold effect of public debt on economic growth in Sub-Saharan A," MPRA Paper 120429, University Library of Munich, Germany.
    3. D'Andrea, Sara, 2022. "A Meta-Analysis on the Debt-Growth Relationship," MPRA Paper 114409, University Library of Munich, Germany.
    4. Nzeh, Innocent Chile, 2020. "Public Debt and Economic Growth in Nigeria: Investigating the Optimal Threshold Level," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(2), pages 112-127, June.
    5. Bulus Gokay Canberk, 2020. "Growth-maximizing public debt in Turkey: An empirical investigation," Economics and Business Review, Sciendo, vol. 6(3), pages 68-87, August.

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    More about this item

    Keywords

    economic growth; Public debt; PTR model;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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