TY - JOUR AU - Reinhart,Carmen M. AU - Rogoff,Kenneth S. TI - Growth in a Time of Debt JF - National Bureau of Economic Research Working Paper Series VL - No. 15639 PY - 2010 Y2 - January 2010 UR - http://www.nber.org/papers/w15639 L1 - http://www.nber.org/papers/w15639.pdf N1 - Author contact info: Carmen M. Reinhart Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617 496 8643 E-Mail: carmen_reinhart@harvard.edu Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 216 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu M2 - featured in NBER digest on 2010-04-01 AB - We study economic growth and inflation at different levels of government and external debt. Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases. ER -