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War and peace: Explosive U.S. public debt, 1791–2009

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  • Yoon, Gawon

Abstract

We show, in this study, that the U.S. public debt–GDP ratio was explosive in nature during the 1791–2009 sample period. The huge increase in U.S. debt during World War II is responsible for this result. Our findings differ profoundly from those generated by the standard unit root tests, which typically conclude that the U.S. public debt had a unit root.

Suggested Citation

  • Yoon, Gawon, 2012. "War and peace: Explosive U.S. public debt, 1791–2009," Economics Letters, Elsevier, vol. 115(1), pages 1-3.
  • Handle: RePEc:eee:ecolet:v:115:y:2012:i:1:p:1-3
    DOI: 10.1016/j.econlet.2011.11.020
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    References listed on IDEAS

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    1. Joakim Westerlund & Silika Prohl, 2010. "Panel cointegration tests of the sustainability hypothesis in rich OECD countries," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1355-1364.
    2. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
    3. Georgios Chortareas & George Kapetanios & Merih Uctum, 2008. "Nonlinear Alternatives to Unit Root Tests and Public Finances Sustainability: Some Evidence from Latin American and Caribbean Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(5), pages 645-663, October.
    4. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 1-19, March.
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    Cited by:

    1. Niklas Potrafke & Markus Reischmann, 2013. "Explosive Target Balances," CESifo Working Paper Series 4297, CESifo Group Munich.
    2. Bystrov, Victor & Mackewicz, Michał, 2016. "Recurrent explosive behaviour of debt-to-GDP ratio," MPRA Paper 75203, University Library of Munich, Germany.
    3. Potrafke, Niklas & Reischmann, Markus, 2014. "Explosive Target balances of the German Bundesbank," Economic Modelling, Elsevier, vol. 42(C), pages 439-444.

    More about this item

    Keywords

    Public debt; Sustainability; Recursive unit root test; Explosiveness;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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