Non-linear Growth-Determinants Nexus: the Role of Sovereign Debt

• Po-Chin Wu ^[1] ; Shiao-Yen Liu ^[1] ; Tsai-Yuan Huang ^[2]
  1. [1] Chung Yuan Christian University

     Chung Yuan Christian University

     Taoyuan District, Taiwán

     
  2. [2] National Pingtung University

     National Pingtung University

     Pingtung City, Taiwán

     
• Localización: Hacienda Pública Española / Review of Public Economics, ISSN 0210-1173, Nº 222, 2017, págs. 43-63
• Idioma: inglés
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• Resumen

  • We expand the new growth model as a panel smooth transition regression specification to measure the effects of determinants on growth and the role of debt ratio in the growth-determinants nexus. In the model, we consider new determinants (FDI, export and tourism) and use a two-period lagged debtGDP ratio as the transition variable. The effects of determinants on growth vary across countries and with time, depending on the value of the transition variable. The threshold of the debt-GDP ratio (73.019%) is a referenced index to set the ceiling of debt-GDP ratio for the fiscal stability. For countries with high debt ratios, the policies to accumulate human capital and promote tourism are more effective in boosting growth than to stimulate domestic physical investment and export. For countries with low debt ratios, the conclusion is opposite. Thus, lowering debt ratio is not always favorable for the contributions of individual determinants to growth.