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Re-Visiting the Debt–Output Nexus from the Perspectives of Long-Term Trend and Short-Term Volatility: An Application of the Threshold Model

Year: 2026

Type: article

Abstract: Using the Hamilton filter and the panel threshold model, this study provides new evidence of the threshold effects of debt on output in 14 Asia-Pacific countries over the period 2005 to 2019. In the long term, we found a threshold debt value of 73.5 percent of GDP, below which debt has a positive effect on GDP, and the positive effect turns negative when debt goes above the threshold level. In the short term, we noted that debt volatility reduces output volatility, and the impact is greater with larger negative fluctuations in debts. The findings have important policy implications.

Source: Bulletin of Monetary Economics and Banking

DOI: 10.59091/2460-9196.1960

Authors: Hong Chen, Diviya Narayan, Baljeet Singh

Institutions: Fuzhou University of International Studies and Trade, University of the South Pacific

Language: English

Topic: Fiscal Policies and Political Economy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: diamond

OpenAlex ID: W7128494121

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