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Reducing High Public Debt Ratios: Lessons from UK Experience

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  • Nicholas Crafts

Abstract

This paper examines contrasting experiences of the United Kingdom in addressing high public debt to GDP ratios following major wars. A clear message is that interest rate/growth rate differentials were more important than primary budget surpluses for the different outcomes. The debt to GDP ratio fell very rapidly under financial repression following World War II but remained stubbornly high despite large budget surpluses with price deflation after World War I. Implications for policymakers today are that averting price deflation is a high priority and that supply-side policies that raise growth could play an important part in debt reduction.
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  • Nicholas Crafts, 2016. "Reducing High Public Debt Ratios: Lessons from UK Experience," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 201-223, June.
    • Handle: RePEc:ifs:fistud:v:37:y:2016:i::p:201-223
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    File URL: http://hdl.handle.net/10.1111/
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    Cited by:

    1. Mr. S. M. Ali Abbas & Laura Blattner & Mark De Broeck & Ms. Asmaa A ElGanainy & Malin Hu, 2014. "Sovereign Debt Composition in Advanced Economies: A Historical Perspective," IMF Working Papers 2014/162, International Monetary Fund.
    2. Crafts, Nicholas, 2021. "What Can We Learn from the UK’s Post-1945 Economic Reforms?," The Warwick Economics Research Paper Series (TWERPS) 1370, University of Warwick, Department of Economics.
    3. Òscar Jordà & Katharina Knoll & Dmitry Kuvshinov & Moritz Schularick & Alan M Taylor, 2019. "The Rate of Return on Everything, 1870–2015," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1225-1298.
    4. Sayantan Ghosal & Marcus Miller, 2019. "Introduction to the special issue on sovereign debt restructuring," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 309-319.
    5. Ellison, Martin & Scott, Andrew, 2017. "Managing the UK National Debt 1694-2017," CEPR Discussion Papers 12304, C.E.P.R. Discussion Papers.
    6. FitzGerald, John & Kenny, Seán, 2018. "Managing a Century of Debt," Lund Papers in Economic History 171, Lund University, Department of Economic History.
    7. John Fitzgerald & Se n Kenny, 2017. "Till Debt Do Us Part :Financial Implications of the Divorce of the Irish Free State from the UK, 1922-6," Trinity Economics Papers tep2117, Trinity College Dublin, Department of Economics.
    8. Brooks, D. & Needham, D., 2023. "The Historical Importance of Growth and Inflation in Reducing High UK Public Debt Ratios," Cambridge Working Papers in Economics 2341, Faculty of Economics, University of Cambridge.
    9. Teupe, Sebastian, 2020. "Keynes, Inflation, and the Public Debt: "How to Pay for the War" as a Policy Prescription for Financial Repression?," Working Papers 16, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    10. Moreno Badia, Marialuz & Medas, Paulo & Gupta, Pranav & Xiang, Yuan, 2022. "Debt is not free," Journal of International Money and Finance, Elsevier, vol. 127(C).

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