External Debt and Growth
By Catherine A. Pattillo, H. Poirson, Luca A Ricci. Social Science Research Network, 2002
885 citations recorded by the source corpus.
This paper assesses the non linear impact of external debt on growth using a large panel data set of 93 developing countries over 1969-98. Results are generally robust across different econometric methodologies, regression specifications, and different debt indicators. For a country with average indebtedness, doubling the debt ratio would reduce annual per capita growth by between half and a full percentage point. The differential in per capita growth between countries with external indebtedness (in net present value) below 100 percent of exports and above 300 percent of exports seems to be in excess of 2 percent per annum. For countries that are to benefit from debt reduction under the current HIPC initiative, per capita growth might increase by 1 percentage point, unless constrained by other macroeconomic and structural economic distortions. Our findings also suggest that the average impact of debt becomes negative at about 160-170 percent of exports or 35-40 percent of GDP. The marginal impact of debt starts being negative at about half of these values. High debt appears to reduce growth mainly by lowering the efficiency of investment rather than its volume.
View Paper: https://www.semanticscholar.org/paper/d51d224f3afbc13c1bb9a4b43242b894b84f3847
Citations in the corpus
- Debt Overhang or Debt Irrelevance? Revisiting the Debt-Growth Link (2005, background): “…while countries with poor conditions do not (their marginal effect of debt on growth becomes null).27 27 Overall, the results can explain why Pattillo, Poirson, and Ricci (2002), who did not distinguish across countries, found substantial variability in the estimates for overhang thresholds.”
- The Role of Domestic Debt Markets in Economic Growth: An Empirical Investigation for Low-Income Countries and Emerging Markets (2007, unknown): “5 -- similar to Pattillo et al. (2002), but significantly higher than Mankiw et al.'s (1992) range of 2.1-2.2. The coefficient on fiscal balance (FISBAL) is, expectedly, significant and positive in all regressions hovering in the 0.1 to 0.2 range, and virtually identical to the range found in Pattil”
- Finding the Tipping Point - When Sovereign Debt Turns Bad (2010, unknown): “Second, other studies (Cordella, Ricci, and Ruiz-Arranz 2010; Pattillo, Poirson, and Ricci 2002, 2004; and Reinhart and Rogoff 2010) investigate the short-run effect of external debt on growth.”
- The Impact of High and Growing Government Debt on Economic Growth: An Empirical Investigation for the Euro Area (2010, unknown): “As in Pattillo et al. (2002) and Schclarek (2004), we also analyse the impact of debt on total factor productivity (TFP), according to the following regression equation: The estimation results, presented in Table 4 Appendix 3, point to a similar concave relationship between public debt and TFP,…”