International Monetary Fund, (2016), “Fiscal Monitor: Debt—Use It Wisely”, IMF, Οctober
At 225 percent of world GDP, the global debt of the nonfinancial sector—comprising the general government, households, and nonfinancial firms—is currently at an all-time high. Two-thirds, amounting to about $100 trillion, consists of liabilities of the private sector which, as documented in an extensive literature, can carry great risks when they reach excessive levels. However, there is considerable heterogeneity, as not all countries are in the same phase of the debt cycle, nor do they face the same risks. Nevertheless, there are concerns that the sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery. Resolving this “private debt overhang” problem is, however, not easy in the current global environment of low nominal output growth.
Relevant Posts
- OECD (2016), “OECD Sovereign Borrowing Outlook 2016”, OECD Publishing, 6 September
- Forni, Lorenzo, Palomba, Geremia, Pereira, Joana, Richmond, Christine J., (2016), “Sovereign Debt Restructuring and Growth”, IMF Publications, Working Paper No. 16/147, 22 July