“If a country’s public debt reaches 77 percent of its gross domestic product (GDP), bad things start to happen,” says Dr. Mehmet Caner, professor of economics at NC State and co-author of the study. “There is a tipping point for national debt, and if you exceed that point the amount of debt will have a linear relationship to declines in economic growth. The more debt you have, the slower your GDP will grow.
“For example,” Caner says, “if a country’s GDP is growing at a rate of three percent annually, and it increases its debt from 80 percent to 90 percent, its economic growth will shrink the following year to 2.8 percent.”
However, the researchers say it is important to note that the tipping point – a debt level of 77 percent or more – was developed based on an analysis of the debt of 100 countries over 30 years. “That tipping point could be higher or lower for any specific nation, based on the nation’s wealth,” says Tom Grennes, a professor of economics at NC State and co-author of the study. For example, the researchers found that countries with emerging economies and lower per-capita incomes, such as China and Guatemala, had a tipping point of 64 percent. That means those countries can sustain less debt before it begins to curtail their economic growth.
“The United States has not exceeded the tipping point yet,” Grennes says. “During our sample period of 1980-2008, U.S. debt was 61 percent of GDP. But we do need to think about this as we move forward, and this research will help national and international leaders make informed, long-term economic decisions.”
Caner agrees, saying, “You do not want to pile on the debt forever. Some debt can be good – if you start at a low level of debt and increase it slightly, there is a positive effect on GDP growth. But you do not want to exceed the threshold of 77 percent for an extended period of time.”
A paper describing the study, “Finding the Tipping Point: When Sovereign Debt Turns Bad,” was co-authored by Fritzi Koehler-Geib of the World Bank. The paper will be published in October in a World Bank volume titled Sovereign Debt and the Financial Crisis. The book will be distributed at the annual meeting of the IMF and World Bank, being held in Washington, D.C., Oct. 8-10.
Matt Shipman | Newswise Science News
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)
The Institute of Semiconductor Technology and the Institute of Physical and Theoretical Chemistry, both members of the Laboratory for Emerging Nanometrology (LENA), at Technische Universität Braunschweig are partners in a new European research project entitled ChipScope, which aims to develop a completely new and extremely small optical microscope capable of observing the interior of living cells in real time. A consortium of 7 partners from 5 countries will tackle this issue with very ambitious objectives during a four-year research program.
To demonstrate the usefulness of this new scientific tool, at the end of the project the developed chip-sized microscope will be used to observe in real-time...
Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.
The results will be published on March 22 in the journal „Astronomy & Astrophysics“.
Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...
Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.
Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...
In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...
20.03.2017 | Event News
14.03.2017 | Event News
07.03.2017 | Event News
30.03.2017 | Health and Medicine
30.03.2017 | Health and Medicine
30.03.2017 | Medical Engineering