This paper offers an empirical analysis of how public and private debt jointly influence economic growth. We consider the endogeneity and interlink of two debt variables which are subject to regime switch in a dynamic panel data model. Using data from 29 OECD countries, the threshold effect of the interaction of the public and private debt on economic growth is found to be negative and significant when the aggregate debt to GDP ratio reaches 220%, beyond which the marginal effect of public (or private) debt further increases on top of the non-interactive effect. It is shown that the true effect of individual debt is largely underestimated if the interactive effect is omitted. We also decompose private debt into household and corporate debt and show that the public–private debt interaction is likely operating through the channels of household debt and public debt. We examine the robustness of the threshold effects to banking crises, output volatility, institutional quality, tax, private and public pension savings, participation rate as well as potential outliers.

The US government debt is now in uncharted waters. From the founding of the nation until 1968, government debt moved up and down without a trend, but over the past 50 years, debt relative to the size of the economy has increased continuously. The United States does not appear to have a coherent debt policy. It is not Greece, and there is no evidence of a likely default on US government bonds in the near future. However, there is evidence that Americans have already borne the costs of high debt levels, and without a reform of policy these costs will continue in the future. Using a new econometric technique for threshold autoregression and a debt measure that includes private debt as well as public debt, we estimate that in the period 1995 to 2014, US economic growth was more than 1 percentage point lower than it would have been at a debt level below the threshold. Other Organisation for Economic Co-operation and Development (OECD) countries also had lower growth rates as a result of high debt levels. Many countries have recently adopted some form of fiscal rule, including balanced budgets, intended to limit debt and raise growth rates. Fiscal rules involve a tradeoff between limiting debt and preserving flexibility to respond to economic shocks. In this paper we discuss problems related to designing optimal fiscal rules.

The Jones Act, which requires the use of American ships on all domestic voyages, has been in place for nearly a century. Its purpose when enacted was to strengthen national security by creating a strong shipbuilding industry and merchant marine. But by denying American businesses access to the best shipping, the act has imposed large losses on American consumers. Recent developments in the world economy, including globalization of ownership, offshore outsourcing of ship components, and extensive use of flags of convenience, have made the act even more burdensome. Since recent contributions of the merchant marine to national security have been small or negative, major reform of the Jones Act is overdue. Such reform would be consistent with the goal of eliminating excessive regulation of the American economy.

U.S. Government debt relative to the size of the economy has risen to the point where it is likely to be interfering with real economic growth. Short-run fiscal policy has deteriorated from being counter-cyclical to pro-cyclical. The decline in the quality of U.S. fiscal institutions calls for major reform that might include a limit on the ratio of government debt to GDP. The EU also faces fundamental fiscal problems, but for a different reason.

In his earlier award-winning book, 1491, Charles C. Mann studied civilizations of the Americas prior to the arrival of Columbus. As a journalist on various scientific topics, he has written for the Atlantic Monthly, Science, National Geographic, and related publications. In 1493, he studies the effect of Columbus and the Europeans who followed him on plants, animals, and people of the Americas. He also studies the effects of transplanting plants and animals from the Americas to the other continents of the world. This movement of plants, animals, and people in both directions was called the Columbian Exchange (CE) by the historian, Crosby (1973). Mann follows Crosby by interpreting the voyages of Columbus as reuniting the separate continents to their earlier form when they were a single landmass called Pangaea, 250 million years ago. Mann emphasizes the importance of humans in overcoming geographical barriers and in re-shaping the world. He follows some biologists by calling the period after 1492 the Homogenocene, a new epoch in human history that results from the “mixing of unlike substances to create a uniform blend”. Mann's approach is to borrow from the literature of several disciplines that have addressed the CE, and to provide a synthesis that is informative to non-specialists. He introduces a personal element to the book by visiting important historical sites related to the CE and tracing the movement of crops, animals, and people from the time of Columbus to today. For example, he begins by visiting the site in the Dominican Republic where Columbus landed in 1492. He then visits a park in Manila that contains a statue of Miguel Legazpi, the Spanish founder of Manila. He also visits Yuegang, a town in coastal China that was important for the China-Manila trade, and Belem and Manaus, Brazilian towns that were important for the rubber trade. He visits Puebla, Mexico and discusses how the Talavera ceramics of Puebla were influenced by the Chinese ceramics coming from Manila, as well as ceramics from Talavera de la Reina in Spain. The book consists of nine chapters based on important products, locations, or groups of people. He includes separate chapters on the more important products, such as potatoes, sugar, maize, and rubber, and he provides shorter discussion of others, such as chocolate, chili peppers (capsicum), wheat, and cattle, that have altered cultures. A more comprehensive list of products that were exported from or imported to the Americas can be found in Crosby or Nunn and Qian (2010). Not all changes were beneficial, and Mann acknowledges unfavorable effects of the CE by including an entire chapter (“Evil Air”) on diseases. Death rates among slaves and natives of the Americas were high, but they were also high for early English settlers. In the Jamestown colony (1607–1623), 80% of the English settlers died within months of arriving. Mann provides useful information about the advanced civilizations that the Spanish encountered when they arrived in America. The corn-based civilizations were centered in Mexico, and the potato-based cultures were in the Andes. Columbus and the Conquistadors are villains to some modern writers, but Mann avoids judging them as villains or heroes. He does document the importance of these participants in the Columbian Exchange for the Americas and the entire world. After the Spanish realized that America was not India, acquiring gold and silver was their main goal. However, their search for precious metals had many unintended consequences. It initiated a diffusion of plants, animals, and people that had enormous biological and economic consequences throughout the world. Mann illustrates the diffusion process by following the travels of several important products. There were no potatoes in Ireland, Germany, or anywhere in Europe before Columbus. Potatoes were domesticated in the Andes as early as 2000 BC, and they were sent to Europe after Pizarro attacked the Andes in 1532. After a slow introduction, they became a major staple in Northern Europe, that contributed to population growth (Nunn and Qian, 2011). The European population data used by Malthus to construct his theory of population was based on a sample period that included the introduction of the potato in Europe. Historians, such as McNeill, consider the transplantation of potatoes from America to Europe to be a major reason for subsequent European domination of much of the world from 1750–1950. Potatoes were not without problems, especially the potato blight that contributed to the Irish Potato Famine of the 1840s. Also the appearance of the potato beetle in 1861 caused problems that led to the development of chemical pesticides that first included arsenic. The Andes that sent potatoes to Europe also sent guano, the first intensive fertilizer. Guano exports to Europe experienced a brief boom period until they were displaced by nitrates from Chile and later by the development of chemical fertilizers. Mann identifies potatoes as an early example of the modern agro-industrial complex: improved crops, high-intensity fertilizers, and factory-made pesticides that have been praised by some for high productivity but denounced by others for high toxicity. Sugar was native to New Guinea, and it was gradually moved to India, the Middle East, and to the islands off the coast of northwest Africa. Sugar was often produced with slave labor, and in the ninth century, lower Mesopotamia was covered with extensive sugarcane plantations worked by slaves from East Africa (Findlay and O'Rourke). When sugarcane production moved to the Americas, beginning with the West Indies, the derived demand for slave labor increased, and millions of slaves were sent across the Atlantic Ocean. Mann discusses how diseases and immunities influenced the choice between slave and indentured labor. Traders from China and the Philippine Islands had traded long before the Spanish arrived (and named the islands after King Philip), but the founding of Manila by Legazpi in 1570 made Manila an important intermediary in the trade between China and Spanish America. The early trade was dominated by exchanging silver from Potosi in modern Bolivia for silk and porcelain from China. Potosi, a mining town above 10,000 feet in the Andes, became the largest town in the Americas. The trading relationship led to the transplantation of American crops to China, especially maize and sweet potatoes. Production of these crops grew rapidly in China and contributed to a spurt of population growth similar to what Malthus observed in Europe. However, planting of maize and sweet potatoes on steep slopes where rice would not grow also contributed to deforestation and soil erosion. When the Spanish arrived in the New World, South America was the only source of rubber in the world. Europeans were amazed to see their first rubber ball from America. Some Brazilian cities, including Belem and Manaus, enjoyed a brief boom while they were monopoly exporters to Europe. However, an Englishman, Henry Wickham, smuggled rubber tree seeds out of the Amazon in 1876 and planted them in the Kew Gardens in England. Later they were transplanted to Asian locations where they prospered. Because Wickham contributed to the demise of the rubber monopoly, some Brazilians revile him as a “prince of thieves” and a “bio-pirate”. Rubber production has expanded in South China and Laos recently, and Mann warns that the region is not prepared for the likely appearance of a plant disease. Changes induced by the CE were so fundamental that Mann considered the subsequent period to be an entirely new epoch. The human response to the new opportunities followed a trial and error process that resulted in enormous economic benefits as well as many errors, such as spreading disease and pollution and expanding the use of slave labor. Not all migrant plants and animals were welcome, and some were considered to be “invasive species”. The process of overcoming geographical barriers and reuniting Pangaea by moving plants and animals and people continues today. Mann applies the concept of the Columbian Exchange, originally introduced by Crosby, and extends it in several ways. He provides more detail about the connections across products and inputs and across regions of the world. He incorporates recent archeological information about specific sites relevant to the CE. He provides useful information about diseases that have affected plants, animals, and people in ways that influenced the CE. Mann assembles an extensive body of evidence to indicate why and how Columbus and participants in the Columbian Exchange were extremely influential figures. Mann is not an economist, but he has a good feel for identifying economic issues and recognizing economic connections. He shows some awareness of the economics literature on trade and growth, but he does not take a stand on the broader economic issues related to trade and economic growth that have been studied by others (Acemoglu et al. 2002), Nunn and Qian, 2011, Nunn, 2011, Grennes 2007). Reuniting the continents provided new trading opportunities, especially for European countries with an Atlantic coast. Spain and Portugal were the pioneers, but England and the Netherlands were better prepared (Acemoglu et al. 2005) and received greater benefits. New beneficial trade with America may have influenced the fact that the Industrial Revolution began in England. Economic growth spread to other countries, but growth was not uniform across countries. One result is the Great Divergence in incomes today. (Pomeranz 2000). As part of the Columbian Exchange, cultures have borrowed from each other extensively, whether modern residents know it or not. Mann closes with a song sung by Philippine children giving thanks for the pleasures of their culture, including traditional food, such as jicama, eggplant, string beans, lima beans, peanuts, radishes, mustard, onions, tomatoes, garlic, ginger, and sesame seeds. Unknown to the children and some of their parents, is the fact that all these products were transplanted from the Americas or other continents. To some ecologists, the Columbian Exchange was the most important event since the extinction of the dinosaurs (Crosby). It was also a crucial economic event in the history of globalization (O'Rourke and Williamson). The recent episode of globalization that began around 1980 has had a profound effect on modern economies, and the episode that began in 1492 shaped subsequent globalization in important ways. Mann has provided useful data and insights into the ongoing process. The immediate effects of the CE were on agriculture and on the broader agro-industrial complex. The mass movement of people, both voluntary and coerced, had a profound effect on migrants as well as those who did not migrate. The exchange of plants, animals, and people also had a broader effect on the Industrial Revolution and the subsequent pattern of world economic growth. Mann's book should be a good read for economists interested in history, specialists in other disciplines, and the general public.

The importance of distance for international trade remains an unsettled issue. Innovations in information technology have reduced the costs of offshore outsourcing of services. However, empirical studies using the gravity model continue to demonstrate that distance is important for merchandise and service trade. We estimate a gravity model of the determinants of service trade. After we properly control for all non-transport trade costs, including information barriers, and multilateral resistance terms as suggested by Anderson and van Wincoop (2003), we show that the remaining influence of distance is negligible. (C) 2011 Elsevier B.V. All rights reserved.

This paper analyzes the functions and performance of the Sovereign wealth funds of the Russian Federation and Norway. Sovereign wealth fund of emerging Russia is an evolving institution. Recently available data for the Russian fund make it possible to compare its performance with that of the more established Norwegian fund. In what aspects are Russian and Norwegian stabilization funds similar? What makes them differ? The data indicate that the Russian fund has been more erratic in terms of injections of oil and gas revenue into the fund and in withdrawals from the fund. Unlike the Norwegian fund, the Russian fund used resources to support current domestic investments. During out sample period, assets of the Russian fund grew faster, but this was partly due to greater injections into the fund. The Russian fund also increased the portfolio share of foreign bonds, although they had a lower rate of return. In spite of differences, investments of both funds followed a random walk.

Using state level personal income, we document the substantial heterogeneity in the magnitude and timing of the Great Moderation. Low income states experienced remarkable moderation, but some richer states experienced significant increases in volatility. We evaluate the findings from a development perspective, and discuss how differences in income per capita and the structure of production can determine the heterogeneity in income volatility across states.

Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth. Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time? The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 99 developing and developed economies spanning a time period from 1980 to 2008. The estimations establish a threshold of 77 percent public debt-to-GDP ratio. If debt is above this threshold, each additional percentage point of debt costs 0.017 percentage points of annual real growth. The effect is even more pronounced in emerging markets where the threshold is 64 percent debt-to-GDP ratio. In these countries, the loss in annual real growth with each additional percentage point in public debt amounts to 0.02 percentage points. The cumulative effect on real GDP could be substantial. Importantly, the estimations control for other variables that might impact growth, such as the initial level of per-capita-GDP.

No AccessNov 2010Finding the Tipping Point: When Sovereign Debt Turns BadAuthors/Editors: Mehmet Caner, Thomas Grennes, Fritzi Koehler-GeibMehmet CanerSearch for more papers by this author, Thomas GrennesSearch for more papers by this author, Fritzi Koehler-GeibSearch for more papers by this authorhttps://doi.org/10.1596/9780821384831_CH03AboutView ChaptersPDF (0.3 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:Assesses the effect of public liabilities on economic growth by examining questions such as (1) whether there is a tipping point in public debt beyond which a country’s economic growth suffers and (2) what the quantitative impact of public debt is on economic growth if debt stays above the threshold for an extended period of time. Based on a study of 99 developing and developed economies for 1980–2008, if the average public debt to GDP ratio remains above 77 percent in the long run, each additional percentage point increase in the ratio costs 0.017 percentage point of annual real growth. The effect is even more profound in emerging markets where the loss in annual real growth amounts to 0.02 percentage point. Although temporary deviations from the threshold in the context of short-term fiscal stabilization policies may be appropriate, surpassing these thresholds for extended periods could slow economic growth for years. Previous chapterNext chapter FiguresreferencesRecommendeddetailsCited byTaxonomy and tendencies in sustainable finance: A comprehensive literature analysisFrontiers in Environmental Science, Vol.109 August 2022Role of Uncertainty in Debt-Growth NexusPrague Economic Papers, Vol.31, No.1Public Debt and Economic Growth Nexus in the Euro Area: A Dynamic Panel ARDL ApproachScientific Annals of Economics and Business, Vol.67, No.31 January 2020IMPACT OF THE GOVERNMENT DEBT ON ECONOMIC DEVELOPMENT OF COUNTRYWORLD OF FINANCE, No.2(59)1 January 2019Is There a Threshold Effect of Public Debt on Economic Growth?The Impact of Public Debt on Economic Growth: A Review of Contemporary LiteratureThe Review of Black Political Economy, Vol.45, No.413 March 2019Public debt and economic growth in Spain, 1851–2013Cliometrica, Vol.12, No.223 February 2017Fiscal Policy of the EU: Implications for Romania9 April 2018Testing for a Debt-Threshold Effect on Output GrowthFiscal Studies, Vol.38, No.430 August 2017Implications for Economic Outcomes29 November 2017Fiscal sustainability in an emerging market economy: When does public debt turn bad?Journal of Policy Modeling, Vol.39, No.1SHS Web of Conferences, Vol.39Single-Variable Threshold Effects in Ordered Response Models With an Application to Estimating the Income-Happiness GradientJournal of Business & Economic Statistics, Vol.34, No.120 January 2016Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?Public Administration and Development, Vol.35, No.520 October 2015The laffer curve and the debt-growth link in low-income Sub-Saharan African economiesJournal of Economic Studies, Vol.42, No.5Federal government debt and economic growth: Evidence from MalaysiaProgress in Development Studies, Vol.15, No.34 August 2015Macroeconomic Overview of the Indian EconomyDebt and Development in SIDS: An Urgent Call for ActionDebt intolerance and the 90 per cent debt threshold: two impossibility theoremsEconomy and Society, Vol.42, No.416 May 2013Fiscal Consolidation: Issues and Evidence View Published: November 2010ISBN: 978-0-8213-8483-1e-ISBN: 978-0-8213-8543-2 Copyright & Permissions Related RegionsAfricaEurope and Central AsiaLatin America & CaribbeanRelated CountriesBrazilRelated TopicsFinance and Financial Sector DevelopmentInternational Economics & TradeMacroeconomics and Economic GrowthPrivate Sector DevelopmentPublic Sector Development KeywordsCAPITAL FLOWCENTRAL BANKSDEBTDEBT EXPLOSIONSDEBT INTOLERANCEDEBT MANAGEMENTDEBT OVERHANGDEBT PROBLEMDEBT RATIODEBT RATIOSDEBT THRESHOLDDEBT THRESHOLDSDEFAULTDEFICITSDOMESTIC FINANCIAL MARKETSEXTERNAL DEBTFINANCIAL CRISESFINANCIAL CRISISGDPGOVERNMENT DEBTINCOMEINCOME LEVELSPUBLIC DEBTSOVEREIGN DEBT PDF DownloadLoading ...

During the current episode of globalization, capital has flown primarily to high income countries. Attempts to explain this “Lucas Paradox” have focused on the quality of institutions. We analyze data from a major institutional investor, the Norwegian Sovereign Wealth Fund, to estimate the separate effects of income per capita and institutional quality on international capital flows. After controlling for institutions, GDP per capita remains the primary determinant of investment.

Click to increase image sizeClick to decrease image size Acknowledgments Ronald Findlay and Kevin H. O’Rourke. Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton, NJ: Princeton University Press, 2007.

The transition economies of Central and Eastern Europe (CEE) have become important exporters of many types of services to Western Europe. We identify the sources of CEE's advantages over competing exporters, such as India, China and Brazil, using disaggregated data on service exports and a novel estimation technique for the gravity equation. Our results indicate that the importance of geographical distance varies substantially across types of service exports. Geography is important for exports of construction services, but it has a negligible impact on computer-related services. However, the relative quality of legal institutions influences trade across a broad range of service categories. The results demonstrate that aggregating services that are not homogeneous could conceal important differences in the effects of geographical distance and other variables on the pattern of service trade.

Using state level personal income, we empirically demonstrate the importance of economic development and diversification for the changes in volatility. We show that volatility of income growth is initially decreasing in the level of income and the degree of diversification. Yet, as state income continues rising, its volatility starts increasing. We also find that expansion of interstate banking and the size of the service sector are among the factors that have influenced volatility.

The U.S. Senate recently passed a bill that would further restrict imports of textiles, and a House vote on that bill is expected this fall. To attract more congressional votes, provisions were added that would restrict shoe imports and increase the textile quotas of countries that buy more U.S. agricultural products. The stated purpose of the bill is to protect the jobs of Americans currently employed in those industries. The main feature of the bill is a set of global import quotas that would separate the American and world markets for textiles and shoes. It would preserve a share of the U.S. market for domestic producers regardless of the relative costs of imported and domestic products. Since market shares would be determined by politicians and bureaucrats rather than consumers and producers, the bill would further diminish the influence of private competitive markets for textile products.

American Journal of Agricultural EconomicsVolume 91, Issue 1 p. 290-291 Books Review The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich by Mishkin, Frederic S. Thomas Grennes, Thomas Grennes North Carolina State UniversitySearch for more papers by this author Thomas Grennes, Thomas Grennes North Carolina State UniversitySearch for more papers by this author First published: 01 February 2009 https://doi.org/10.1111/j.1467-8276.2008.01247_1.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL No abstract is available for this article. Volume91, Issue1February 2009Pages 290-291 RelatedInformation

Le fonds norvégien est l'un des fonds souverains les plus transparents. Sa Stratégie d'investissement ressemble à celle d'autres fonds communs de placement. Cependant, on observe une évolution continue vers un portefeuille plus risqué remettant en question l'objet du fonds. Si son objectif est de protéger les citoyens norvégiens contre la volatilité des marchés mondiaux de l'énergie, on peut s'interroger sur sa capacité à atteindre cet objectif lorsqu'il expose les actifs publics à la volatilité d'un niveau égal ou supérieur sur les marchés financiers ? Classification JEL.' F30, G29

This paper evaluates sovereign wealth funds in light of the extreme volatility of energy prices and the severe global recession that began in 2008. A recent paper by Das characterized the assets of funds as showing steady growth in the past and likely increased importance in the future. However, recent developments have reduced the relative importance of funds and have demonstrated the sensitivity of the funds to energy prices and world business cycles. Investments by sovereign wealth funds have the potential to introduce political influence into corporate governance, but this potential is much smaller than the interventions into corporate governance by governments of the United States and elsewhere connected to corporate bail-outs during the recession. Lack of transparency remains a problem for certain sovereign wealth funds, but anti-recession interventions by governments have been characterized by extreme lack of transparency.