Working Paper: NBER ID: w25494
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 over time. 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: public debt; sovereign borrowing; debt consolidation
JEL Codes: F0; H0; N0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wars (D74) | public debt (H63) |
| financial crises (G01) | public debt (H63) |
| depressions (E32) | debt-to-GDP ratios (H68) |
| successful debt consolidation episodes (G51) | debt-to-GDP ratios (H68) |
| primary surpluses (H62) | debt-to-GDP ratios (H68) |
| Great Britain debt consolidation (H63) | debt-to-GDP ratios (H68) |
| U.S. debt consolidation (H63) | debt-to-GDP ratios (H68) |
| France debt consolidation (G51) | debt-to-GDP ratios (H68) |
| political representation of creditor interests (F34) | successful debt consolidation episodes (G51) |
| limited functions of government (H10) | successful debt consolidation episodes (G51) |
| absence of major crises (H12) | successful debt consolidation episodes (G51) |