Public debt and growth: Heterogeneity and non linearity
We study the long run relationship between public debt and growth in a large panel of countries. Our analysis builds on theoretical arguments and data considerations in modelling the debt growth relationship as heterogeneous across countries. We investigate the debt growth nexus adopting linear and non linear specifications, employing novel methods and diagnostics from the time series literature adapted for use in the panel. We find some support for a negative relationship between public debt and long run growth across countries, but no evidence for a similar, let alone common, debt threshold within countries.