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Maryam Heidarian; Amene Shahidi
Abstract
The present study evaluates the mediating and interactive role of governance in the debt-economic growth relationship in a selection of countries in the world. For this purpose, the selected countries are divided into four groups: 1- Countries with high debt and high governance; 2- Countries with low ...
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The present study evaluates the mediating and interactive role of governance in the debt-economic growth relationship in a selection of countries in the world. For this purpose, the selected countries are divided into four groups: 1- Countries with high debt and high governance; 2- Countries with low debt and high governance; 3- Countries with low debt and low governance and 4- Countries with high debt and low governance are categorized and the models considered are estimated with panel autoregressive distributed lag regression model, during the period 2002-2023. The results of the model estimation related to the effect of debt (along with variables such as investment, degree of trade play, labor force participation rate, inflation rate) on economic growth indicate that in the short term in all four groups of countries, debt has caused a decrease in economic growth, but in the long term, it has only increased economic growth in countries with high governance. Also, when the effect of good governance along with government debt has been interactively fitted on economic growth, it has reduced the negative effect of debt or increased its long-term positive effect in all groups of countries. Based on the research findings, it can be argued that governance is a variable affecting the relationship between debt and growth; In other words. the governance context and structure in countries can play an important role in the effective management of government debt and the further growth of productive investment and, consequently, economic growth.
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Ali Falahati; Maryam Heidarian
Abstract
In an economy system, government activities play a fundamental role in economic growth and development of countries, but increase these activities have a positive effect on economic growth until a certain threshold and from this threshold excessive increase in government activities not only have no positive ...
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In an economy system, government activities play a fundamental role in economic growth and development of countries, but increase these activities have a positive effect on economic growth until a certain threshold and from this threshold excessive increase in government activities not only have no positive effect on economic growth, but these activities are main barrier to growth. Including of these activities, can mention the government''s capital expenditures and public debt. In this study, is tried to study the threshold effects and non-linear government investment and public debt on GDP in two separate models during of 2000-2016 using of provincial data and Panel Smooth Transition Regression Model (PSTR). The results of linearity test show that there is a nonlinear relationship between variables. Also, the inclusion of a transfer function with a threshold parameter which is representing a two-regime model, is sufficient to determine the nonlinear relationship between variables. The results show that public debt and investment in first regime have a positive effect on GDP, but by crossing of threshold and entering to second regime, severity of this effect will be increased and negative. It seems, this result is due to the crowed-out effect on private sector and increase in public debt due to rising government spending and confirms Laffer curve hypothesis.
