Working Paper: CEPR ID: DP17172
Authors: Michael R. Wickens
Abstract: The motivation for this paper is concerns in the UK with how to bring down the currently high level of the debt-GDP ratio. We consider whether anything can be learned from previous experience over the last 120 years by examining the contributions both to the increase in the debt-GDP ratio and to the reduction of the debt-GDP ratio of various components of the government budget constraint: the primary deficit, growth, inflation and interest rates and payments. We also examine the effectiveness of policy in influencing these components. We conclude by suggesting a combination of these components that might be economically and politically achievable.
Keywords: debt-to-GDP ratio; primary deficit; growth; inflation
JEL Codes: E62; H63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| primary deficit (H62) | debt-to-GDP ratio (H68) |
| growth (O40) | debt-to-GDP ratio (H68) |
| inflation (E31) | debt-to-GDP ratio (H68) |
| interest rates (E43) | debt-to-GDP ratio (H68) |