| Abstract |
Public debt has becomes an essential global issue where a country has a
tendency to seek alternative to borrow abroad to cushion any severe
negative impact due to economic shocks. This is due to the assumption that
a country can run into deficit in current year with the expectation that it will
turn into surplus in the future. Malaysia as one of the emerging economies
experienced decreasing trend of public debt of GDP in the 1990s, but in the
2000s, the scenario has change and settle at 55% of GDP in 2015. This
study adopts Threshold Regression method to determine the public debt
threshold from 1991-2014 and to estimate the impact of the different debt
level on the economic growth in the long-run. There is a positive impact of
debt on growth when public debt is below 41% of GDP and marginal impact
when the debt level between 41% - 53% of GDP. However, there is a
detrimental impact on growth when public debt exceed 53% of GDP. |