The Threshold Effect of Public Debt on Economic Growth: A Comparative Morocco-South Korea Analysis Using the PSTR Approach

DOI

10.2991/978-94-6239-680-7_9How to use a DOI?

Keywords

Public debt; Economic growth; Threshold effects; Panel Smooth Transition Regression (PSTR); Morocco; South Korea

Abstract

This paper examines the non-linear relationship between public indebtedness and macroeconomic performance in Morocco and South Korea using quarterly data over 1990Q1–2023Q4, with a particular focus on identifying debt thresholds beyond which growth dynamics fundamentally change. A Panel Smooth Transition Regression (PSTR) model is estimated to allow the marginal effect of public debt on real GDP growth to vary smoothly across regimes, with the transition driven by the public debt-to-GDP ratio and controlling for investment, trade openness and fiscal balance. The analysis identifies a unified debt threshold at 56.5% of GDP, marking a critical inflection point in the debt–growth relationship. Contrary to conventional debt overhang predictions, the estimated debt coefficient strengthens in high-indebtedness regimes ( β = + 0.130 ) compared with low-debt environments ( β = + 0.020 ), while elevated debt burdens reduce fiscal multiplier effectiveness by about 32% and turn trade liberalization effects from neutral to contractionary. The estimated smoothness parameter ( γ = 0.421 ) indicates gradual rather than abrupt regime transitions, providing policymakers with scope for adjustment.The findings challenge universalist threshold frameworks by showing that sustainable debt levels depend critically on institutional quality and the productive use of borrowing, and they provide comparative evidence for an emerging economy and a more advanced economy sharing a common intermediate threshold.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Amine Leghrari
AU  - Chakib Jerry
AU  - Mounir Jerry
PY  - 2026
DA  - 2026/06/20
TI  - The Threshold Effect of Public Debt on Economic Growth: A Comparative Morocco-South Korea Analysis Using the PSTR Approach
BT  - Proceedings of the Conference Morocco-Korea Cooperation: A Lever for Afro-Asian Development (MKC 2025)
PB  - Atlantis Press
SP  - 107
EP  - 124
SN  - 2667-128X
UR  - https://doi.org/10.2991/978-94-6239-680-7_9
DO  - 10.2991/978-94-6239-680-7_9
ID  - Leghrari2026
ER  -