Debt to GDP & Future Economic Growth

This was my most popular post in 2013.

owenzidar

There has been a lot of discussion today on Reinhart and Rogoff’s work on Debt to GDP & future economic growth (see Mike Konczal, KrugmanCEPR, Brad Plumer,  and the original critique from Herden, Ash, Pollin), so I wanted to highlight some work on this issue that I put together when helping Brad Delong and Laura Tyson on an IMF presentation on fiscal policy after the crisis.

I pulled data from R&R’s AER paper on debt to GDP and economic growth to see if there is any evidence of a break at a 90. Here are three preliminary conclusions and supporting graphs:

  1. Persistently 90+ Public Debt to GDP countries tend to grow less quickly over next 5 years, but the distribution of historical outcomes suggests that disaster scenarios are much less common than modestly slower 5 year growth for these countries.
  2. Nonparametric graphs of Public Debt…

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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