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

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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. Carlos Marinheiro, 2006. "The sustainability of Portuguese fiscal policy from a historical perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(2), pages 155-179, June.
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  9. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR;CES;MSH, vol. 30(82), pages 291-333.
  10. 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.
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