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Historical Patterns and Dynamics of Public Debt—Evidence From a New Database

Author Info

Listed author(s):
  • S M Ali Abbas
  • Nazim Belhocine
  • Asmaa El-Ganainy
  • Mark Horton

Abstract

This paper introduces the first truly comprehensive database on gross government-debt-to-GDP ratios, covering nearly the entire IMF membership (178 countries) and spanning an exceptionally long time period (going back to 1880 for most advanced and some emerging economies). The paper then uses the database to document the evolution of public debt ratios in advanced, emerging, and low-income economies, and relate them to contemporaneous developments in growth, commodity prices, and debt relief, respectively. Finally, the paper identifies 129 large debt increases and decreases observed in 19 advanced economies over 1880–2007 and decomposes them into contributions from the primary balance, the interest-growth differential, and the stock-flow adjustment term (a composite of valuation effects and “below-the-line” fiscal operations). The analysis suggests a pattern of asymmetric contributions: the primary balance plays a key role in debt reductions, except during the post-WWII period (when the growth-interest differential was extremely favorable); while debt surges were often associated with large stock-flow adjustments, likely reflecting assumption of implicit liabilities and exchange rate changes and, for the cases of debt reduction, debt default.

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Article provided by Palgrave Macmillan & International Monetary Fund in its journal IMF Economic Review.

Volume (Year): 59 (2011)
Issue (Month): 4 (November)
Pages: 717-742

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Handle: RePEc:pal:imfecr:v:59:y:2011:i:4:p:717-742
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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
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  9. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  10. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "A Decade of Debt," Central Banking, Analysis, and Economic Policies Book Series,in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.), Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 4, pages 97-135 Central Bank of Chile.
  11. Easterly, william, 2001. "Growth implosions, debt explosions, and my Aunt Marilyn : do growth slowdowns cause public debt crises?," Policy Research Working Paper Series 2531, The World Bank.
  12. Ludvig Söderling & Hanan Morsy & Martin Petri & Martin Hommes & Manal Fouad & Wojciech Maliszewski, 2007. "Public Debt and Fiscal Vulnerability in the Middle East," IMF Working Papers 07/12, International Monetary Fund.
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