Working Paper: CEPR ID: DP13471
Authors: Barry Eichengreen; Asmaa Elganainy; Rui Esteves; Kris James Mitchener
Abstract: We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.
Keywords: Sovereign Debt; Debt History; Sovereign Debt Crises; Sovereign Debt Composition
JEL Codes: H6; N1; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| public debt (H63) | military expenditures (H56) |
| public debt (H63) | infrastructure projects (H54) |
| public debt (H63) | public goods (H41) |
| high public debt (H69) | significant political and economic changes (F69) |
| successful debt consolidation episodes (G51) | aftermath of significant conflicts (D74) |
| sustained primary surpluses (H62) | reduction in debt-to-GDP ratios (H63) |
| economic growth (O49) | reduction in debt-to-GDP ratios (H63) |
| government commitment to maintaining real value of obligations (H63) | reduction in debt-to-GDP ratios (H63) |
| introduction of income tax (H26) | reduction in debt-to-GDP ratios (H63) |
| strong economic growth (O51) | reduction in debt-to-GDP ratios (H63) |
| fiscal discipline (E62) | reduction in debt-to-GDP ratios (H63) |