Public debt ratio and its determinants in France since 1890 Does econometrics support the historical evidence?
AbstractCan the evolution of public debt be predicted from its determinants? While the recovery programs undertaken during the 2008 crisis have led to a big takeoff in public debt ratios, the factors likely to curb its upward spiraling dynamic are subject to considerable uncertainty and fuel debate among economists. Are budgetary consolidations alone sufficient? Is there a need to return to inflationary policies, or is strong economic growth the essential factor to bring about a drop in the public debt ratio? The present paper proposes a long term retrospective study of the French case. A model of advanced indicators for the debt ratio is proposed whose results are interpreted in the light of the historical context. It is shown that from the end of the 19th century to the beginning of the 1950s, growth, inflation and primary balances were factors capable of explaining the alternation between upward and downward phases in the debt ratio. Then, during the three decades of the post-war boom, very high inflation and economic growth masked nascent budgetary imbalances while the so-called “stop and go” policies were privileged. The 1980s marked a break in the sense that growth and improvement in the primary balances no longer allowed the upward dynamics of the debt ratio to be reversed.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 385.
Length: 44 pages
Date of creation: 2012
Date of revision:
Public debt; debt ratio; advanced indicators; economic history; forewarning indicator.;
Find related papers by JEL classification:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-HIS-2012-07-23 (Business, Economic & Financial History)
- NEP-PUB-2012-07-23 (Public Finance)
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