Debt and Growth Revisited

Reinhart, Carmen and Rogoff, Kenneth (2010): Debt and Growth Revisited.

Abstract

In a recent paper, we studied economic growth and inflation at different levels of government and external debt. The public discussion of our empirical strategy and results has been somewhat muddled. Here, we attempt to clarify matters, particularly with respect sample coverage (our evidence encompasses forty-four countries over two centuries--not just the United States), debt-growth causality (our book emphasizes the bi-directional nature of the relationship), as well as nonlinearities in the debt-growth connection and thresholds evident in the data (absolutely central points that seem to have been lost in some commentary.) In addition to clarifying the earlier results, this paper enriches our original analysis by providing further discussion of the high debt (over 90 percent of GDP) episodes and their incidence. Some of the implications of our analysis, including for the United States, are taken up in the final section.

• Item Type: MPRA Paper
• Language: English
• Keywords: debt, growth, crisis, advanced economies, historical
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; F - International Economics > F3 - International Finance > F30 - General; N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

References

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Reinhart, Carmen M., and Kenneth S. Rogoff (2010a), “Growth in a Time of Debt” American Economic Review, (May 2010). Revised from NBER working paper 15639, January 2010.

Reinhart, Carmen M., and Kenneth S. Rogoff (2010b), “From Financial Crash to Debt Crisis,” NBER Working Paper 15795, March. Forthcoming in American Economic Review. Reinhart, Carmen M., Miguel A. Savastano and Kenneth S. Rogoff, "Debt Intolerance", in William Brainard and George Perry (eds.), Brookings Papers on Economic Activity 1: 2003, 1-74. An earlier version appeared as NBER Working Paper 9908, August 2003.