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Using post-war data on advanced economies, we find that a higher public debt ratio predicts marginally slower GDP growth under the assumption of a linear relationship. This result is robust to strong persistence in debt ratio, which may cause finite sample bias in estimation and inference. In the nonlinear framework, we find only weak support for piece-wise linear models that explicitly incorporate the idea of a debt tipping point. The threshold estimates from such models are subject to a high level of uncertainty and are sensitive to assumptions on minimum number of observations in each regime. However, using a flexible semiparametric model we uncover that the predictive function is highly complex and behaves quite differently at low, intermediate and high levels of debt. Of particular interest to the recent debate on effects of higher public indebtedness on growth, we find that average annual GDP growth gradually declines by about 0.5% as debt ratio climbs from about 75% to 100%, with most of the effect taking place over the 85-95% range. [ABSTRACT FROM AUTHOR]

In this paper we investigate asymmetries in time-varying means, volatilities, correlations, and betas of equity returns in a multivariate threshold framework. We consider alternative specifications in which the threshold variable is based on well established equity pricing factors and predictors. We find strong threshold effects with respect to market excess return, value premium, and term spread. Our results indicate that the threshold model based on the market excess return provides a flexible and computationally inexpensive specification for modeling asymmetries. We test significance of specific forms of asymmetries using subsampling methods. We compare performance of the proposed threshold model with a variety of alternatives in an out-of-sample setup and find that the threshold model performs remarkably well, especially for investors with relatively high risk aversion. [ABSTRACT FROM AUTHOR]