Thirty years of gathering figures and statistics from 101 countries has yielded results for University researchers concerning the relationship between national debt and economic growth.

Mehmet Caner and Thomas Grennes, professors in the department of economics, conducted a study regarding the correlation between public debt and gross domestic product (GDP) and the consequential effects of debt on economic growth.

Caner and Grennes worked closely with Fritzi Koehler-Geib, an economist from the World Bank, to publish their report on national debt “tipping points.”

Caner and Grennes’ work does not suggest that the U.S. economy is on the precipice of the “tipping point,” but rather the research indicates that if the ratio of national debt to GDP in developed countries stays at a level of 77 percent for an extended period of time, national economic growth will decrease.

“Some people mistake this — the tipping point doesn’t mean that the country is going to default on its national debt,” Grennes said. “It’s not about default. It’s about the rate of economic growth, which starts to go down. This could happen long before the problems of default.”

One does not have to search far for palpable examples of the repercussions of chronic debt, according to Grennes and Caner. The Japanese economy has been struggling recently trying to balances its debt and economic growth, which has shrunk tremendously since its economic powerhouse heyday just two decades ago. The Italian economy appears more like the ruins of ancient Rome than a healthy model compared to other peer nations.

“They stayed beyond this point way too long, and now they lost tremendous growth in GDP,” Caner said.

The study, which was released over the summer to the World Bank and International Monetary Fund (IMF), has received acclaim from the community of economic scholars and in the Oct. 7 issue of The Economist, the financial section cited Caner and Grennes’ work.

“If the authors have got it right, these debts will knock half a percentage point off the collective growth rate of the G20’s rich members,” The Economist special report accounted.

“[The study] is about this long-run fiscal policy,” Grennes said. “There are two points. We do this ratio with debt relative to GDP because in this study we compared many different countries, developed and developing.”

The ratio brings continuity to the equation. An economy can remain healthy even in the face of mounting debt, granted that its GDP grows.

“These ratios can change with the denominator of the GDP. World War II was 120 percent, the highest ever experienced here. Then the ratio dropped to 40 percent by 1980. It grew to 51 percent in 1984, and then 72 percent by 1993,” Grennes said.

The current recession has complicated the outlook on national debt—and with good reason, according to Grennes. Despite the polarized positions that current politicians advocate for the ever-so-exploited term “moving forward,” both Caner and Grennes conducted this research from a nonpartisan standpoint.

“The immediate problem is the recession,” Grennes said. “The policies to get out of the recession currently may be different than the policy to stimulate the economy in the long run. We didn’t really go into that. If you stay in the threshold of 77 percent (as a developed nation), you will get into recession and tax revenues will go down.”

The tipping point issue must be handled with care and expertise as well as a balance, Caner said.

“It’s not drastic if a nation exceeds the threshold one year, just as long as they go under it to counterbalance,” Caner said.

The complexities of debt have thrown many people into confusion, but the basic premise of debt is simple. Governments must spend money and if they do not have enough revenue from taxes, the remainder of the equation must be borrowed — usually in the form of bonds.

The U.S. debt, in terms of the percentage of the national GDP, remains at 84 percent, according to the IMF.

“When the country spends more than it has, it will issue bonds,” Grennes said. “These bonds are held by many Americans, the Japanese, European partners and very recently the Bank of China has bought enormous amounts of bonds.”

The issue of American debt held in Chinese hands has created controversy. Recently, there has been an outcry from peer nations against Chinese economic policy, which has been manipulating its currency.

“They want their exports to be cheap, so they are buying a lot of U.S. bonds to keep the dollar expensive,” Caner said.

Regardless of allocation of the national debt, the U.S. government and the international community are considering policies in light of the tipping point.

Caner and Grennes are not the only people from North Carolina taking a lead in the issue. Last spring, President Obama announced Erskine Bowles, former president of the UNC system, as the head of the bipartisan National Commission on Fiscal Responsibility and Reform. Later this November, this commission will convene and conduct meetings dealing with the national debt.

Additionally, Caner and Grennes’ work must not be taken out of context.

“This shouldn’t be over-interpreted,” Grennes said. “Low interest rates on U.S. government bonds indicate that bondholders expect default to be very unlikely.”