"Finding the Tipping Point -- When Sovereign Debt Turns Bad"
Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth. Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time? The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 101 developing and developed economies spanning a time period from 1980 to 2008. The estimations establish a threshold of 77 percent public debt-to-GDP ratio. If debt is above this threshold, each additional percentage point of debt costs 0.017 percentage points of annual real growth. The effect is even more pronounced in emerging markets where the threshold is 64 percent debt-to-GDP ratio. In these countries, the loss in annual real growth with each additional percentage point in public debt amounts to 0.02 percentage points. The cumulative effect on real GDP could be substantial. Importantly, the estimations control for other variables that might impact growth, such as the initial level of per-capita-GDP.
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dig-okr-1098638752024-08-08T16:01:47Z "Finding the Tipping Point -- When Sovereign Debt Turns Bad" Caner, Mehmet Grennes,Thomas Koehler-Geib, Fritzi AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth. Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time? The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 101 developing and developed economies spanning a time period from 1980 to 2008. The estimations establish a threshold of 77 percent public debt-to-GDP ratio. If debt is above this threshold, each additional percentage point of debt costs 0.017 percentage points of annual real growth. The effect is even more pronounced in emerging markets where the threshold is 64 percent debt-to-GDP ratio. In these countries, the loss in annual real growth with each additional percentage point in public debt amounts to 0.02 percentage points. The cumulative effect on real GDP could be substantial. Importantly, the estimations control for other variables that might impact growth, such as the initial level of per-capita-GDP. 2012-03-19T18:41:22Z 2012-03-19T18:41:22Z 2010-07-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100730091629 https://hdl.handle.net/10986/3875 English Policy Research working paper ; no. WPS 5391 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank application/pdf text/plain |
| institution |
Banco Mundial |
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DSpace |
| country |
Estados Unidos |
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US |
| component |
Bibliográfico |
| access |
En linea |
| databasecode |
dig-okr |
| tag |
biblioteca |
| region |
America del Norte |
| libraryname |
Biblioteca del Banco Mundial |
| language |
English |
| topic |
AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS Caner, Mehmet Grennes,Thomas Koehler-Geib, Fritzi "Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| description |
Public debt has surged during the
current global economic crisis and is expected to increase
further. This development has raised concerns whether public
debt is starting to hit levels where it might negatively
affect economic growth. Does such a tipping point in public
debt exist? How severe would the impact of public debt be on
growth beyond this threshold? What happens if debt stays
above this threshold for an extended period of time? The
present study addresses these questions with the help of
threshold estimations based on a yearly dataset of 101
developing and developed economies spanning a time period
from 1980 to 2008. The estimations establish a threshold of
77 percent public debt-to-GDP ratio. If debt is above this
threshold, each additional percentage point of debt costs
0.017 percentage points of annual real growth. The effect is
even more pronounced in emerging markets where the threshold
is 64 percent debt-to-GDP ratio. In these countries, the
loss in annual real growth with each additional percentage
point in public debt amounts to 0.02 percentage points. The
cumulative effect on real GDP could be substantial.
Importantly, the estimations control for other variables
that might impact growth, such as the initial level of per-capita-GDP. |
| topic_facet |
AVERAGE DEBT BOND BOND MARKETS BONDS CAPITAL FLOW CENTRAL BANKS CENTRAL GOVERNMENT DEBT CONSUMER PRICE INDEX CONTINGENT LIABILITIES CREDIT CONSTRAINTS DEBT EXPLOSIONS DEBT INTOLERANCE DEBT LEVEL DEBT LEVELS DEBT MANAGEMENT DEBT OVERHANG DEBT PROBLEM DEBT RATIO DEBT RATIOS DEBT THRESHOLD DEBT THRESHOLDS DEFICITS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING ECONOMY DOMESTIC FINANCIAL MARKETS ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC OUTLOOK EMERGING MARKETS EXPORTS EXTERNAL DEBT FINANCIAL CRISES FINANCIAL CRISIS FISCAL DEFICITS FISCAL POLICY GDP GDP PER CAPITA GOVERNMENT DEBT GROSS DEBT GROWTH RATE GROWTH RATES INCOME INCOME LEVELS INDEBTEDNESS INDUSTRIAL COUNTRIES INFLATION INSTRUMENT INTERNATIONAL BANK LOW-INCOME COUNTRIES NUISANCE PARAMETER PUBLIC PUBLIC DEBT REAL GDP REAL GROWTH RATE SOVEREIGN DEBT STABILIZATION POLICY TRADE BARRIERS VOLATILITY WORLD DEVELOPMENT INDICATORS |
| author |
Caner, Mehmet Grennes,Thomas Koehler-Geib, Fritzi |
| author_facet |
Caner, Mehmet Grennes,Thomas Koehler-Geib, Fritzi |
| author_sort |
Caner, Mehmet |
| title |
"Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| title_short |
"Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| title_full |
"Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| title_fullStr |
"Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| title_full_unstemmed |
"Finding the Tipping Point -- When Sovereign Debt Turns Bad" |
| title_sort |
"finding the tipping point -- when sovereign debt turns bad" |
| publishDate |
2010-07-01 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100730091629 https://hdl.handle.net/10986/3875 |
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AT canermehmet findingthetippingpointwhensovereigndebtturnsbad AT grennesthomas findingthetippingpointwhensovereigndebtturnsbad AT koehlergeibfritzi findingthetippingpointwhensovereigndebtturnsbad |
| _version_ |
1809105353198010368 |