Public Debt Threshold: Empirical Research in Vietnam

Abstract

This paper aims to provide empirical evidence of Vietnam?s public debt threshold. The data of the annual country's public debt in the 1990 - 2010 period, the threshold model by Hansen (1996, 2000), and the OLS estimation method are employed to test threshold effects and estimate the value of the public debt threshold. The research reveals that Vietnam's public debt threshold is 75.8% of GDP. This finding does not imply that the government should target public debt at this level because it can never know when an unusual shock will happen. Therefore, it is advisable to keep the public debt below this threshold. The detection of the public debt threshold helps the government focus better on control of public debt sustainability.http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=4f86e51f-7bf3-4ba3-8116-b73022c62ced