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New Directions in the Relationship Between Public and Private Debt

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  • Benjamin M. Friedman

Abstract

Until the 1980s the outstanding indebtedness of government and private-sector borrowers in the United States exhibited sufficient negative covariation that total outstanding debt remained steady relative to nonfinancial economic activity. Three hypotheses -- one based on lenders' behavior, one on borrowers? behavior, and one on credit market institutional arrangements -- provide potential explanations for this phenomenon. Since 1980 the U.S. debt markets have departed from these previously prevailing patterns, however, as both government and private borrowing have risen sharply.

Suggested Citation

  • Benjamin M. Friedman, 1987. "New Directions in the Relationship Between Public and Private Debt," NBER Working Papers 2186, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2186
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    References listed on IDEAS

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    1. Ben S. Bernanke & Mark Gertler, 1986. "Agency costs, collateral, and business fluctuations," Proceedings, Federal Reserve Bank of San Francisco.
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    3. Benjamin M. Friedman, 1985. "The Substitutability of Debt and Equity Securities," NBER Chapters, in: Corporate Capital Structures in the United States, pages 197-238, National Bureau of Economic Research, Inc.
    4. Benjamin M. Friedman, 1985. "Crowding Out or Crowding In? Evidence on Debt-Equity Substitutability," NBER Working Papers 1565, National Bureau of Economic Research, Inc.
    5. Benjamin M. Friedman, 1982. "Debt and Economic Activity in the United States," NBER Chapters, in: The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, pages 91-110, National Bureau of Economic Research, Inc.
    6. Bernanke, Ben S, 1981. "Bankruptcy, Liquidity, and Recession," American Economic Review, American Economic Association, vol. 71(2), pages 155-159, May.
    7. Benjamin M. Friedman, 1981. "Debt and Economic Activity in the United States," NBER Working Papers 0704, National Bureau of Economic Research, Inc.
    8. Raymond W. Goldsmith & Robert E. Lipsey & Morris Mendelson, 1963. "Studies in the National Balance Sheet of the United States, Volume 2," NBER Books, National Bureau of Economic Research, Inc, number gold63-2, March.
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    Cited by:

    1. Benjamin M. Friedman, 1988. "Lessons On Monetary Policy From The 1980's," NBER Working Papers 2551, National Bureau of Economic Research, Inc.
    2. Michał Brzozowski & Joanna Siwińska-Gorzelak, 2016. "The Interplay Between Public and Private External Debt Stocks," International Finance, Wiley Blackwell, vol. 19(3), pages 311-332, December.
    3. Stephen M. Miller & Frank S. Russek, 1989. "Are The Twin Deficits Really Related?," Contemporary Economic Policy, Western Economic Association International, vol. 7(4), pages 91-115, October.
    4. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.

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