IMF paper challenges idea of debt threshold effect

IMF researchers have waded into the controversial topic of the impact of public debt on economic growth, finding there is no universal threshold at which high public debt becomes a drag on growth, in a working paper published on September 8.

Famous studies such as Carmen Reinhart and Kenneth Rogoff’s 2010 paper identifying a 90% debt-to-GDP ratio as a threshold fail to account for the “strong homogeneity” across countries, or other factors such as global spillovers, authors Alexander Chudik

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