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Debt And Depression

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  • Janice Boucher Breuer
  • John McDermott

Abstract

We investigate the relationship between public debt ratios and per capita output using episodal data. Episodes of debt and depression occur far more frequently than expected. Growth is lower during episodes of low, moderate, and high debt ratios; while debt ratios are higher during depressions. We look at precedence of entries and exits in overlapping episodes, and the decomposition of the debt ratio during intervals just before and after overlaps. Output movements influence the debt ratio more during exit than entry. Debt movements often precede depressions. Developing countries account for these results almost exclusively. (JEL E32, E62, O47)

Suggested Citation

  • Janice Boucher Breuer & John McDermott, 2019. "Debt And Depression," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 714-730, October.
    • Handle: RePEc:bla:coecpo:v:37:y:2019:i:4:p:714-730
    DOI: 10.1111/coep.12410
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    Cited by:

    1. Guo, Minjie & McDermott, John, 2020. "Sovereign debt and the length of economic depressions," Economic Modelling, Elsevier, vol. 90(C), pages 79-91.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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