Threshold Effects of Sovereign Debt Evidence From the Caribbean

This paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55–56 percent. Moreover, the debt dynamics begin changing well before this threshold is reache...

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Bibliographic Details
Main Author: Drakes, Lisa
Other Authors: Thomas, Chrystol, Craigwell, Roland, Greenidge, Kevin
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2012
Series:IMF Working Papers
Subjects:
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Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55–56 percent. Moreover, the debt dynamics begin changing well before this threshold is reached. Specifically, at debt levels lower than 30 percent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 percent, the effects on economic growth diminishes rapidly and at debt levels reaching 55-56 percent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, debt becomes a drag on growth
Physical Description:23 pages
ISBN:9781475504507