NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Debt Overhangs: Past and Present

Carmen M. Reinhart, Vincent R. Reinhart, Kenneth S. Rogoff

NBER Working Paper No. 18015
Issued in April 2012
NBER Program(s):   IFM   ME

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.

download in pdf format
   (350 K)

email paper

A non-technical summary of this paper is available in the August 2012 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (350 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18015

Published: "Public Debt Overhangs: Advanced-Economy Episodes since 1800" (with Carmen M. Reinhart and Vincent R. Reinhart), Journal of Economic Perspectives, Vol. 26, No. 3, Summer 2012, 69-86. An earlier version was published as "Debt Overhangs: Past and Present," NBER Working Paper No. 18015, April 2012. citation courtesy of

Users who downloaded this paper also downloaded these:
Reinhart and Rogoff w14656 The Aftermath of Financial Crises
Reinhart and Rogoff w16827 A Decade of Debt
Reinhart and Rogoff w15795 From Financial Crash to Debt Crisis
Alesina and Ardagna w15438 Large Changes in Fiscal Policy: Taxes Versus Spending
Reinhart w17941 A Series of Unfortunate Events: Common Sequencing Patterns in Financial Crises
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us