IDEAS home Printed from https://ideas.repec.org/a/taf/nzecpp/v54y2020i1p16-38.html
   My bibliography  Save this article

Equity Market Performance and Public Debt: An Empirical Investigation

Author

Listed:
  • King Yoong Lim

Abstract

While the empirical relationship between public debt and economic growth has been well-researched, there is a gap in terms of understanding the relationship between equity market performance and public debt. Based on propositions derived from a theoretical model and using a quarterly unbalanced panel dataset of 56 economies in the period 1995–2017, we examine this nexus by first estimating a threshold value of public debt above which equity market performance is adversely affected by a change in public debt. After that, the dynamics of equity market performance and change in public debt are examined. We estimate the threshold level to be approximately 17.97 percent of GDP. The short-run and long-run multipliers of a one-percent increase in public debt on equity market returns are 11.57–37.59 and 27.51–78.72 percentage points. These dynamics appear to be different between the economies that are below and above the estimated debt threshold.

Suggested Citation

  • King Yoong Lim, 2020. "Equity Market Performance and Public Debt: An Empirical Investigation," New Zealand Economic Papers, Taylor & Francis Journals, vol. 54(1), pages 16-38, January.
  • Handle: RePEc:taf:nzecpp:v:54:y:2020:i:1:p:16-38
    DOI: 10.1080/00779954.2019.1567574
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00779954.2019.1567574
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00779954.2019.1567574?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chuku, Chuku & Lang, Lin & Lim, King Yoong, 2023. "Public debt, Chinese loans and optimal exploration–extraction in Africa," Energy Economics, Elsevier, vol. 118(C).

    More about this item

    Statistics

    Access and download statistics

    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:taf:nzecpp:v:54:y:2020:i:1:p:16-38. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: http://www.tandfonline.com/RNZP20 .

    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.