NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Role of Growth Slowdowns and Forecast Errors in Public Debt Crises

William Easterly

Chapter in NBER book Fiscal Policy after the Financial Crisis (2013), Alberto Alesina and Francesco Giavazzi, editors (p. 151 - 173)
Conference held December 12-13, 2011
Published in June 2013 by University of Chicago Press
© 2013 by the National Bureau of Economic Research

This chapter presents the simple arithmetic of the relationship between growth slowdowns and debt. This arithmetic indicates an important role for growth in past debt crises in the developing world (HIPC and Latin America in particular), in the Eurozone, and the United States more recently. It shows that when growth forecasts and fiscal policy do not adjust to growth slowdowns, the result is often large forecast errors and budget deficits.

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Commentary on this chapter: Comment, Indira Rajaraman
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