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Dealing with Debt

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  • Reinhart, Carmen M.

    (Harvard University)

  • Reinhart, Vincent

    (American Enterprise Institute)

  • Rogoff, Kenneth

    (Harvard University)

Abstract

This paper explores the menu of options for renormalizing public debt levels relative to nominal activity in the long run, should governments eventually decide to do so. Orthodox ones for medium-term debt stabilization, the standard fare of officialdom, include enhancing growth, running primary budget surpluses, and privatizing government assets. Heterodox polices include restructuring debt contracts, generating unexpected inflation, taxing wealth, and repressing private finance. We examine 70 episodes across 22 advanced economies from 1800 to 2014 where there were significant and sustained reductions in public debt relative to nominal GDP. In the event, advanced countries have relied far more on heterodox approaches than many observers choose to remember.

Suggested Citation

  • Reinhart, Carmen M. & Reinhart, Vincent & Rogoff, Kenneth, 2015. "Dealing with Debt," Working Paper Series rwp15-009, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp15-009
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    Cited by:

    1. Juan Carlos Hatchondo & Leonardo Martinez & Francisco Roch, 2012. "Fiscal rules and the sovereign default premium," Working Paper 12-01, Federal Reserve Bank of Richmond.
    2. Gregori Galofré-Vilà & Martin McKee & Christopher M. Meissner & David Stuckler, 2016. "The Economic Consequences of the 1953 London Debt Agreement," NBER Working Papers 22557, National Bureau of Economic Research, Inc.
    3. Sun, Lixin, 2016. "Corporate Deleveraging and Macroeconomic Policies: Evidence from China," MPRA Paper 69140, University Library of Munich, Germany.
    4. Reinhart, Carmen M. & Reinhart, Vincent & Tashiro, Takeshi, 2016. "Does reserve accumulation crowd out investment?," Journal of International Money and Finance, Elsevier, vol. 63(C), pages 89-111.
    5. Carmen M. Reinhart & Vincent R. Reinhart, 2015. "Financial Crises, Development, and Growth: A Long-term Perspective," World Bank Economic Review, World Bank Group, vol. 29(suppl_1), pages 53-76.
    6. Antonio Bassanetti & Carlo Cottarelli & Andrea F Presbitero, 2019. "Lost and found: market access and public debt dynamics," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 445-471.
    7. Scheer, Alexander & Müller, Gernot & Kriwoluzky, Alexander, 2017. "Financial Repression in General Equilibrium," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168301, Verein für Socialpolitik / German Economic Association.
    8. Andreas Hoffmann, 2019. "Beware of Financial Repression: Lessons from History," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(4), pages 259-266, July.
    9. Consiglio, Andrea & Zenios, Stavros A., 2015. "The Case for Contingent Convertible Debt for Sovereignst," Working Papers 15-13, University of Pennsylvania, Wharton School, Weiss Center.
    10. Emmanuel Yeboah Lartey & Alhassan Musah & Bismark Okyere & Abdul-Nasir Yusif, 2018. "Public Debt and Economic Growth: Evidence From Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 8(6), pages 35-45.
    11. Consiglio Andrea & Zenios Stavros A., 2015. "Risk Management Optimization for Sovereign Debt Restructuring," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 181-213, December.
    12. Guilherme Bandeira & Evi Pappa & Rana Sajedi & Eugenia Vella, 2018. "Fiscal Consolidation in a Low-Inflation Environment: Pay Cuts versus Lost Jobs," International Journal of Central Banking, International Journal of Central Banking, vol. 14(3), pages 7-52, June.
    13. Robertson, D. & Tambakis, D., 2016. "Long-Run Debt Ratios with Fiscal Fatigue," Cambridge Working Papers in Economics 1674, Faculty of Economics, University of Cambridge.
    14. Pompeo Della Posta, 2018. "Fiscal austerity and monetary easing: which one is to be praised for ending the euro area crisis?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 15(1), pages 165-189, June.
    15. Matteo Salto, 2016. "Fiscal Policy after the Crisis – Workshop Proceedings," European Economy - Discussion Papers 2015 - 035, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    16. Stephanie Lo & Kenneth Rogoff, 2015. "Secular stagnation, debt overhang and other rationales for sluggish growth, six years on," BIS Working Papers 482, Bank for International Settlements.
    17. Carlo Cottarelli & Andrea F Presbitero & Antonio Bassanetti, 2016. "Lost and Found; Market Access and Public Debt Dynamics," IMF Working Papers 2016/253, International Monetary Fund.
    18. Gonzalo F. de-Córdoba & Benedetto Molinari & José L. Torres, 2018. "Public Debt Frontier. A toolkit for analyzing fiscal policy and debt sustainability," Working Paper series 18-36, Rimini Centre for Economic Analysis.
    19. Kenneth Rogoff, 2017. "Dealing with Monetary Paralysis at the Zero Bound," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 47-66, Summer.
    20. Andreas Hoffmann & Gunther Schnabl, 2018. "Warum der frühe Ausstieg aus der finanziellen Repression lohnt [Why an Early Exit from Financial Repression is Worthwhile]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 98(7), pages 498-503, July.
    21. António Afonso & Frederico Silva Leal, 2017. "Sovereign yield spreads in the EMU: crisis and structural determinants," Working Papers Department of Economics 2017/09, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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