Public Debt Overhangs: Advanced-Economy Episodes since 1800
AbstractWe identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90 percent for at least five years. Consistent with Reinhart and Rogoff (2010) and most of the more recent research, we find that public debt overhang episodes are associated with lower growth than during other periods. The duration of the average debt overhang episode is perhaps its most striking feature. Among the 26 episodes we identify, 20 lasted more than a decade. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive. These growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates, as in eleven of the episodes, interest rates are not materially higher.
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Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 26 (2012)
Issue (Month): 3 (Summer)
Find related papers by JEL classification:
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
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by Gray in Pseudo-true News on 2013-04-17 07:08:11
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- Balázs Égert, 2012. "Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality?," OECD Economics Department Working Papers 993, OECD Publishing.
- Ugo Panizza & Andrea Filippo Presbitero, 2013. "Public Debt and Economic Growth in Advanced Economies: A Survey," Mo.Fi.R. Working Papers 78, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Brigitte Granville, 2013. "The Current Eurozone – an impediment to critical French reform," Working Papers 42, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
- Kobayashi, Keiichiro, 2013. "A Theory of Public Debt Overhang," CIS Discussion paper series 589, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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- Natasa Bilkic & Ben Carreras Painter & Thomas Gries, 2012. "Unsustainable Sovereign Debt - is the Euro Crisis only the Tip of the Iceberg?," Working Papers 56, University of Paderborn, CIE Center for International Economics.
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