Historical Patterns and Dynamics of Public Debt—Evidence From a New Database

• Published in: IMF economic review Vol. 59; no. 4; pp. 717 - 742
• Main Authors: ABBAS, S. M. ALI, BELHOCINE, NAZIM, EL-GANAINY, ASMAA, HORTON, MARK
• Format: Journal Article
• Language: English
• Published: London Palgrave Macmillan 01.12.2011; Palgrave Macmillan UK; Palgrave Macmillan Ltd. (Springer)
• Series: IMF Economic Review
• Subjects: Capital Markets; Datasets; Debt reduction; Deficit financing; Developing countries; Domestic debt; Economic aspects; Economic crisis; Economic Policy; Economics; Economics and Finance; Emerging markets; Evaluation; External debt; Financial economics; GDP; Government publications; Gross Domestic Product; Industrialized nations; International Economics; International finance; International financial institutions; International organizations; LDCs; Low income groups; Macroeconomics/Monetary Economics//Financial Economics; Public debt; Public debts; Public sector; Ratios; Sovereign debt; Studies; Trends; United Kingdom; F3; H6; N1
• ISSN: 2041-4161; 2041-417X
• DOI: 10.1057/imfer.2011.24

This paper introduces the first truly comprehensive database on gross government-debt-to-GDP ratios, covering nearly the entire IMF membership (178 countries) and spanning an exceptionally long time period (going back to 1880 for most advanced and some emerging economies) . The paper then uses the database to document the evolution of public debt ratios in advanced, emerging, and low-income economies, and relate them to contemporaneous developments in growth, commodity prices, and debt relief, respectively. Finally, the paper identifies 129 large debt increases and decreases observed in 19 advanced economies over 1880-2007 and decomposes them into contributions from the primary balance, the interest-growth differential, and the stock-flow adjustment term (a composite of valuation effects and "below-theline" fiscal operations). The analysis suggests a pattern of asymmetric contributions: the primary balance plays a key role in debt reductions, except during the post-WWII period (when the growth-interest differential was extremely favorable); while debt surges were often associated with large stock-flow adjustments, likely reflecting assumption of implicit liabilities and exchange rate changes and, for the cases of debt reduction, debt default.