The Nonlinear Effects of Public Debt on Economic Growth in the Philippines: Evidence from Threshold Regression Analysis

This study examined the nonlinear effects of public debt on economic growth in the Philippines from 1986 to 2019 using threshold regression analysis. Specifically, the study investigated the effect of real interest rates on real GDP growth and identified the critical public debt threshold that alters economic growth behavior. The study employed a quantitative explanatory research design utilizing secondary time-series data obtained from the Department of Budget and Management, Philippine Statistics Authority, and World Bank databases. Ordinary Least Squares (OLS) and threshold regression analyses were used to determine the relationships among the variables. Findings revealed that higher real interest rates and public debt ratios negatively affect economic growth. The threshold regression analysis identified a critical debt threshold separating low-growth and high-growth debt regimes, confirming the nonlinear nature of the debt-growth relationship. The study concluded that public debt supports economic growth only when maintained at sustainable levels and allocated toward productive investments.

Real GDP Growth Rate, Public Debt Ratio, Real Interest Rate, Threshold Regression, OLS Regression.

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