“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
Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik
RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung
University of Connecticut researchers have created a biodegradable composite made of silk fibers that can be used to repair broken load-bearing bones without the complications sometimes presented by other materials.
Repairing major load-bearing bones such as those in the leg can be a long and uncomfortable process.
Study published in the journal ACS Applied Materials & Interfaces is the outcome of an international effort that included teams from Dresden and Berlin in Germany, and the US.
Scientists at the Helmholtz-Zentrum Dresden-Rossendorf (HZDR) together with colleagues from the Helmholtz-Zentrum Berlin (HZB) and the University of Virginia...
Novel highly efficient and brilliant gamma-ray source: Based on model calculations, physicists of the Max PIanck Institute for Nuclear Physics in Heidelberg propose a novel method for an efficient high-brilliance gamma-ray source. A giant collimated gamma-ray pulse is generated from the interaction of a dense ultra-relativistic electron beam with a thin solid conductor. Energetic gamma-rays are copiously produced as the electron beam splits into filaments while propagating across the conductor. The resulting gamma-ray energy and flux enable novel experiments in nuclear and fundamental physics.
The typical wavelength of light interacting with an object of the microcosm scales with the size of this object. For atoms, this ranges from visible light to...
Stable joint cartilage can be produced from adult stem cells originating from bone marrow. This is made possible by inducing specific molecular processes occurring during embryonic cartilage formation, as researchers from the University and University Hospital of Basel report in the scientific journal PNAS.
Certain mesenchymal stem/stromal cells from the bone marrow of adults are considered extremely promising for skeletal tissue regeneration. These adult stem...
In the fight against cancer, scientists are developing new drugs to hit tumor cells at so far unused weak points. Such a “sore spot” is the protein complex...
13.04.2018 | Event News
12.04.2018 | Event News
09.04.2018 | Event News
20.04.2018 | Physics and Astronomy
20.04.2018 | Interdisciplinary Research
20.04.2018 | Physics and Astronomy