A service provided by the WU Library and the WU IT-Services

Financial stress, sovereign debt and economic activity in industrialized countries: Evidence from dynamic threshold regressions

Proaño, Christian R. and Schoder, Christian and Semmler, Willi (2014) Financial stress, sovereign debt and economic activity in industrialized countries: Evidence from dynamic threshold regressions. Journal of International Money and Finance, 45. pp. 17-37. ISSN 02615606

[img]
Preview
PDF
Download (685Kb) | Preview

Abstract

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non-linear manner due to amplifications from the financial sector. Employing dynamic country-specific and dynamic panel threshold regression methods, we study the non-linear relation between the growth rate and the debt-to-GDP ratio using quarterly data for sixteen industrialized countries for the period 1981Q1-2013Q2. We find that the debt-to-GDP ratio has impaired economic growth primarily during times of high financial stress and only for countries of the European Monetary Union and not for the stand-alone countries in our sample. A high debt-to-GDP ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. The original publication is available at http://www.elsevier.com/
Keywords: financial stress / sovereign debt / economic growth / dynamic panel threshold regression
Classification Codes: JEL E20, G15, H63
Divisions: Departments > Volkswirtschaft > Außenwirtschaft und Entwicklung
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Elena Simukovic
Date Deposited: 05 May 2015 13:38
Last Modified: 14 Mar 2017 13:41
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/65823/
URI: http://epub.wu.ac.at/id/eprint/4522

Actions

View Item