Working Paper: CEPR ID: DP1357
Authors: Albrecht Ritschl
Abstract: Proposals for reducing high public debt are sometimes viewed with scepticism, both because of adverse consequences for growth and political economy considerations. This paper looks into the debt history of Britain, Germany and France, to gain more insights into why national debt was accumulated and how it was reduced. The historical evidence studied here leaves only a limited role for public choice interpretations, as most of the historical debt record was dominated by international conflict. Whichever strategy towards reducing the debt burden was adopted, there seem to be no visible effects on long-term growth performance.
Keywords: debt; retirement; default; war finance; reparations; growth
JEL Codes: E6; H6; N1; N4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| war finance (H56) | accumulation of public debt in Britain (H63) |
| accumulation of public debt in Britain (H63) | debt reduction in peacetime (H63) |
| debt histories of France and Germany (N24) | interconnectedness through reparations (F02) |
| excessive borrowing during the war (H56) | hyperinflation in Germany (N14) |
| hyperinflation in Germany (N14) | debt crisis (F34) |
| external pressures from reparation demands (F32) | inability to stabilize budget in Germany (H60) |