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Threshold Effects of Debt on Economic Growth in Africa
Author(s) -
Ndoricimpa Arcade
Publication year - 2017
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12282
Subject(s) - nexus (standard) , economics , debt , estimation , threshold model , control (management) , econometrics , debt to gdp ratio , monetary economics , panel data , external debt , macroeconomics , computer science , management , embedded system
This study aims at examining the debt threshold effects on economic growth in Africa. Non‐dynamic and dynamic panel threshold regression approaches are used. The findings indicate that the estimated debt threshold is sensitive to the estimation technique used and to growth control variables included in the estimation. Existence of nonlinearities in the debt‐growth nexus cannot be denied. The findings show that while low debt is neutral or growth‐enhancing, high debt is consistently detrimental to growth for all the cases considered. This study shows that caution is needed when suggesting a debt threshold since this can be sensitive to modelling choice and to growth control variables. Nonlinearities in the debt‐growth nexus are established but further analysis is needed to suggest a policy.