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Extra Government Debt in the Great Recession: All Intentional?


  • Riccardo Fiorito

    () (University of Siena)


Among the Great Recession costs there was the adoption of fiscal policies, generally bounded to increase government debt. In the Oecd area, however, the resulting debt jump was not simply due to counter-cyclical discretion, mostly because of two reasons: the first is that such policies were not always feasible, given the surveillance on the Eurozone countries. The second is the occurrence of an unusual nominal recession, increasing the debt-to-GDP ratio and affecting most Oecd economies in 2009 and the Euro periphery also later. Using a simple accounting scheme, the sources of the debt creation are evaluated during the 2008-13 crisis and the years immediately before (2000-07), comparing the US and the UK with the four biggest Eurozone countries. In general, deficits, inflation and real growth do not have the same role before or during the crisis. Differences are also found for countries pursuing, in special times, more counter-cyclical fiscal policies (US, UK but also Spain and France) and countries like Italy and, especially, Germany following more prudential lines: in one case, because of Italy’s limited fiscal space and, in the other, because of a predilection for stability that Germany maintained even during the most destabilizing, postwar, crisis

Suggested Citation

  • Riccardo Fiorito, 2014. "Extra Government Debt in the Great Recession: All Intentional?," Working Papers LuissLab 14110, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  • Handle: RePEc:lui:lleewp:14110

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    References listed on IDEAS

    1. Ángel Estrada & Jordi Galí & David López-Salido, 2013. "Patterns of Convergence and Divergence in the Euro Area," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 601-630, December.
    2. Jonathan A. Parker, 2011. "On Measuring the Effects of Fiscal Policy in Recessions," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 703-718, September.
    3. Marc Robinson, 2009. "Accrual budgeting and fiscal policy," OECD Journal on Budgeting, OECD Publishing, vol. 9(1), pages 1-29.
    4. Marc Robinson, 2009. "Accrual Budgeting and Fiscal Policy," IMF Working Papers 09/84, International Monetary Fund.
    5. Eisner, Robert & Pieper, Paul J, 1986. "A New View of the Federal Debt and Budget Deficits: Reply," American Economic Review, American Economic Association, vol. 76(5), pages 1156-1157, December.
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    More about this item


    Government Debt; Recession; Nominal GDP;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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