"...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...
Private debt, in contrast to public debt, tends to shrink sharply for an extended period after a financial crisis. Just as a rapid expansion in private credit fuels the boom phase of the cycle, so does serious deleveraging exacerbate the post-crisis downturn...
Periods of sharp deleveraging tend to associated with much lower growth and higher unemployment. The magnitude of the current deleveraging episode in the United States has no counterpart in the post-war period. In varying degrees, the private sector (households and firms) in many other countries (notably both advanced and emerging Europe) are also unwinding the
debt built up during the boom years. Thus, private deleveraging may be another legacy of the financial crisis that may dampen growth in the medium term...
The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crises in the United States and elsewhere. We examine the experience of forty four countries spanning up to two centuries of data on central government debt, inflation and growth. Our main finding is that across both advanced countries and
23 emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes...
Why are there thresholds in debt, and why 90 percent? This is an important question that merits further research, but we would speculate that the phenomenon is closely linked to logic underlying our earlier analysis of “debt intolerance” in Reinhart, Rogoff, and Savastao(2003)..."
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