Fatas, A., (2013), “Debt and secular stagnation”, Antonia Fatas on the Global Economy Blog, 10 December.
In a recent post Paul Krugman refers to the potential link between rising levels of debt prior to the 2008 crisis and the current discussion on secular stagnation. The argument can be illustrated by the chart below (borrowed from Krugman’s post).
Quoting from Krugman’s post:
“Debt was rising by around 2 percent of GDP annually; that’s not going to happen in the future, which a naive calculation suggests a reduction in demand, other things equal, of around 2 percent of GDP”
In summary, increasing debt ratios area unsustainable and the adjustment can have a negative effect on growth. The argument is probably right but when it comes to assessing the real impact on growth I think we need to do a more careful analysis before reaching that conclusion.
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Σχετικές Αναρτήσεις
- Bastian, J., (2013), “Debt relief or debt restructuring for Greece?”, MacroPolis, The Agora Blog, 08 December.
- Eberhardt, M. and Presbitero, A., (2013), “Public debt and economic growth: There is no ‘tipping point’”, VoxEU, 17 November.
- Brender, A., Pisani, F. and Gagna, E., (2013), The Sovereign Debt Crisis: Placing a curb on growth, Brussells: Centre for European Policy Studies (CEPS).