The global financial crisis of 2008–09 has sent public debt on sharplyhigher trajectories. With the economic recovery gradually taking hold, thefocus is now shifting to fiscal “exit” strategies. Medium-term consolidationefforts are likely to include not only tax increases but also sizeable spendingcuts. Our paper uses a standard new Keynesian model to show that the an-ticipation…
The costs of wars have been the main driver of public debt in the Western World during the modern era. The late twentieth century stands out as a period that saw a pronounced increase of government debt to GDP ratios in peacetime. This paper assesses the role that financial crises have played in shaping the…
Public debt has reached unprecedented levels in advanced economies. It has become today the most pressing and difficult policy challenge that Western governments have to face. Against this background, the Banque de France’s Financial Stability Review No. 16 focuses on ‘Public debt, Monetary policy and Financial Stability’ PUBLIC DEBT, MONETARY POLIC… by Debt Free on…
This paper shows that budget deficits account for a relatively small fraction of debt growth and that stock-flow reconciliation, which is often considered a residual entity, is one of the key determinants of debt dynamics. After having explained the importance of the stock-flow reconciliation, the paper shows that this residual entity can be partly explained…
