Unbundled debt and economic growth in developed and developing economies: An empirical analysis. (22nd February 2018)

• Record Type: Journal Article
• Authors: Intartaglia, Maurizio; Antoniades, Andreas; Bhattacharyya, Sambit
• Other Names: Greenaway David guestEditor.
• Is Part Of: World economy. Volume 41:Number 12(2018)
• Page Start: 3345
• Page End: 3358
• Publication Date: 2018-02-22
• Subjects: debt -- developing economies -- granger causality -- growth -- household debt; International economic relations -- Periodicals; 330
• DOI: 10.1111/twec.12626
• Languages: English
• ISSNs: 0378-5920

Abstract

Abstract: We unbundle the effect of debt on economic growth using a new panel data set sourced from Vague (2014, The next economic disaster: Why it's coming and how to avoid it . Philadelphia, PA: University of Pennsylvania Press) for 48 countries over the period 1961–2015. We distinguish between public, private, household and nonfinancial corporation (NFC) debt. We use the panel vector autoregressive approach, Granger causality tests and impulse response to establish causality. We also test the heterogeneity in the debt–growth relationship across developed and developing countries. In our full sample of countries, all types of debt appear to be harmful to economic growth. The negative effect of public debt appears to be uniform across developed and developing countries, although the impact is much stronger on developed countries. Household debt appears to be expansionary in developing countries whereas contractionary in developed countries. Nonfinancial corporation debt appears to have no impact on developing countries but negative impact on developed countries. Finally, total debt (i.e., the sum of public, household and NFC debt) has a negative impact on growth in developed countries, but no impact is detected in the case of developing countries.