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The Liquidation of Government Debt

Ms.Carmen Reinhart
The Liquidation of Government Debt by Ms.Carmen Reinhart PDF

Author : Ms.Carmen Reinhart
Publisher : International Monetary Fund
Page : 47 pages
File Size : 50,52 MB
Release : 2015-01-21
Category : Business & Economics
ISBN : 1498338380

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High public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or belowmarket real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies.

Global Waves of Debt

M. Ayhan Kose
Global Waves of Debt by M. Ayhan Kose PDF

Author : M. Ayhan Kose
Publisher : World Bank Publications
Page : 403 pages
File Size : 36,5 MB
Release : 2021-03-03
Category : Business & Economics
ISBN : 1464815453

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The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.