New Directions in the Relationship Between Public and Private Debt
NBER Working Paper No. 2186 (Also Reprint No. r0895)
Until the 1980s the outstanding indebtedness of government and private-sector borrowers in the United States exhibited sufficient negative covariation that total outstanding debt remained steady relative to nonfinancial economic activity. Three hypotheses -- one based on lenders' behavior, one on borrowers? behavior, and one on credit market institutional arrangements -- provide potential explanations for this phenomenon. Since 1980 the U.S. debt markets have departed from these previously prevailing patterns, however, as both government and private borrowing have risen sharply.
Published: Friedman, Benjamin M. "New Directions in the Relation Between Public and Private Debt." Science, Vol. 236, No. 4800, (April 24, 1987), pp. 397-403.