The Forgotten History of Domestic Debt
AbstractThere is a rich scholarly literature on sovereign default on external debt. Comparatively little is known about sovereign defaults on domestic debt. Even today, cross-country data on domestic public debt remains curiously exotic, particularly prior to the 1980s. We have filled this gap in the literature by compiling a database on central government public debt (external and domestic). The data span 1914 to 2007 for most countries, reaching back into the nineteenth century for many. Our findings on debt sustainability, sovereign defaults, the temptation to inflate, and the hierarchy of creditors only scratch the surface of what the domestic public debt data can reveal. First, domestic debt is big -- for the 64 countries for which we have long time series, domestic debt accounts for almost two-thirds of total public debt. For most of the sample, this debt carries a market interest rate (except for the financial repression era between WWII and financial liberalization). Second, the data go a long ways toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds. Third, domestic debt has largely been ignored in the vast empirical work on inflation. In fact, domestic debt (a significant portion of which is long term and non-indexed) is often much larger than the monetary base in the run-up to high inflation episodes. Last, the widely-held view that domestic residents are strictly junior to external creditors does not find broad support.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13946.
Date of creation: Apr 2008
Date of revision:
Note: IFM PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F3 - International Economics - - International Finance
- N0 - Economic History - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-29 (All new papers)
- NEP-CBA-2008-04-29 (Central Banking)
- NEP-HIS-2008-04-29 (Business, Economic & Financial History)
- NEP-MAC-2008-04-29 (Macroeconomics)
- NEP-OPM-2008-04-29 (Open Economy Macroeconomic)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Aguiar & Gita Gopinath, 2007.
"Emerging Market Business Cycles: The Cycle Is the Trend,"
Journal of Political Economy,
University of Chicago Press, vol. 115, pages 69-102.
- Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers 04-4, Federal Reserve Bank of Boston.
- Mark Aguiar & Gita Gopinath, 2004. "Emerging Market Business Cycles: The Cycle is the Trend," NBER Working Papers 10734, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003.
NBER Working Papers
9908, National Bureau of Economic Research, Inc.
- Torsten Persson & Gerard Roland & Guido Tabellini, .
"Comparative Politics and Public Finance,"
114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Persson, T. & Roland, G. & Tabellini, G., 1997. "Comparative Politics and Public Finance," Papers 633, Stockholm - International Economic Studies.
- Persson, Torsten & Roland, Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," CEPR Discussion Papers 1737, C.E.P.R. Discussion Papers.
- Persson, Torsten & Roland , Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," Seminar Papers 633, Stockholm University, Institute for International Economic Studies.
- Kevin Cowan & Eduardo Levy-Yeyati & Ugo Panizza & Federico Sturzenegger, 2006.
"Sovereign Debt in the Americas: New Data and Stylized Facts,"
Working Papers Central Bank of Chile
371, Central Bank of Chile.
- Kevin Cowan & Eduardo Levy Yeyati & Ugo Panizza & Federico Sturzenegger, 2006. "Sovereign Debt in the Americas: New Data and Stylized Facts," Research Department Publications 4480, Inter-American Development Bank, Research Department.
- Kevin Cowan & Eduardo Levy Yeyati & Ugo Panizza & Federico Sturzenegger, 2006. "Sovereign Debt In The Americas: New Data and Stylized Facts," Business School Working Papers 2006-09, Universidad Torcuato Di Tella.
- Dornbusch, Rudiger & Fischer, Stanley, 1993.
World Bank Economic Review,
World Bank Group, vol. 7(1), pages 1-44, January.
- Robert J. Barro, 1983.
"Inflationary Finance under Discretion and Rules,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 16(1), pages 1-16, February.
- Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004.
"When it rains, it pours: Procyclical capital flows and macroeconomic policies,"
13883, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
- Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
- Sargent, Thomas J & Velde, Francois R, 1995. "Macroeconomic Features of the French Revolution," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 474-518, June.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
- Brock, Philip L, 1989. "Reserve Requirements and the Inflation Tax," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 106-21, February.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," NBER Working Papers 13882, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2011.
"From Financial Crash to Debt Crisis,"
American Economic Review,
American Economic Association, vol. 101(5), pages 1676-1706, August.
- Carmen M. Reinhart, 2010. "This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises," NBER Working Papers 15815, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Savastano, Miguel, 2003. "The Realities of Modern Hyperinflation," MPRA Paper 7578, University Library of Munich, Germany.
- Anastasia Guscina & Olivier Jeanne, 2006. "Government Debt in Emerging Market Countries: A New Data Set," IMF Working Papers 06/98, International Monetary Fund.
- M. Ayhan Kose & Kenneth Rogoff & Eswar Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
- Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-77, September.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.