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Debt problems and macroeconomic policies

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  • Lawrence H. Summers

Abstract

This paper examines the recent dramatic increase in the ratio of US non-financial debt to GNP. It concludes that it is largely the result of federal budget deficits. There does not appear to have been a major change in traditional patterns of private sector borrowing in recent years. The excessive accumulation of Federal debt probably threatens financial stability more than recent increases in private debt.
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Suggested Citation

  • Lawrence H. Summers, 1986. "Debt problems and macroeconomic policies," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 165-208.
    • Handle: RePEc:fip:fedkpr:y:1986:p:165-208
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    References listed on IDEAS

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    1. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 415-429, November.
    2. Benjamin M. Friedman, 1982. "Debt and Economic Activity in the United States," NBER Chapters, in: The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, pages 91-110, National Bureau of Economic Research, Inc.
    3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    4. Lawrence H. Summers, 1985. "Issues in National Savings Policy," NBER Working Papers 1710, National Bureau of Economic Research, Inc.
    5. Benjamin M. Friedman, 1981. "Debt and Economic Activity in the United States," NBER Working Papers 0704, National Bureau of Economic Research, Inc.
    6. David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-249, Part I, M.
    7. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    8. Albert M. Wojnilower, 1980. "The Central Role of Credit Crunches in Recent Financial History," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(2), pages 277-340.
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    Cited by:

    1. International Monetary Fund, 2010. "Fiscal Policy and the Current Account," IMF Working Papers 2010/121, International Monetary Fund.
    2. El-Baz, Osama, 2014. "Empirical Investigation of the Twin Deficits Hypothesis: The Egyptian Case (1990-2012)," MPRA Paper 53428, University Library of Munich, Germany.
    3. Bilman, Mustafa Erhan & Karaoğlan, Sadık, 2020. "Does the twin deficit hypothesis hold in the OECD countries under different real interest rate regimes?," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 205-215.
    4. S M Ali Abbas & Jacques Bouhga-Hagbe & Antonio Fatás & Paolo Mauro & Ricardo C Velloso, 2011. "Fiscal Policy and the Current Account," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(4), pages 603-629, November.
    5. Olalekan Emmanuel Obademi & Olawale. O. Okubanjo, 2013. "External Debt and Nigeria’s Economic Growth Nexus, Matters Arising," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 1(2), pages 61-66.
    6. Dumitriu, Ramona & Stefanescu, Răzvan, 2020. "Iluzii financiare, Partea întâi [Financial Illusions, Part 1]," MPRA Paper 101201, University Library of Munich, Germany, revised 17 Jun 2020.
    7. Yuan Chang, 2016. "Financial Soundness Indicator, Financial Cycle, Credit Cycle and Business Cycle£­Evidence from Taiwan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 166-182, April.
    8. Giancarlo Corsetti & Gernot J. Müller, 2006. "Twin deficits: squaring theory, evidence and common sense [‘Temporary and permanent government spending in an open economy: some evidence for the United Kingdom’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(48), pages 598-638.
    9. Lori L. Leachman & Michael Thorpe, 1998. "Intertemporal Solvency in the Small Open Economy of Australia," The Economic Record, The Economic Society of Australia, vol. 74(226), pages 231-242, September.
    10. Lori Leachman & Bill Francis, 2002. "Twin Deficits: Apparition or Reality?," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1121-1132.
    11. Jer-Shiou Chiou & Pei-Shan Wu & Antony Chang & Bor-Yi Huang, 2007. "The asymmetric information and price manipulation in stock market," Applied Economics, Taylor & Francis Journals, vol. 39(7), pages 883-891.
    12. Helena Glebocki Keefe & Ralf Hepp, 2024. "The effects of European fiscal discipline measures on current account balances," International Economics and Economic Policy, Springer, vol. 21(1), pages 251-283, February.
    13. Benjamin M. Friedman, 1990. "Views on the Likelihood of Financial Crisis," NBER Working Papers 3407, National Bureau of Economic Research, Inc.
    14. Demdoumi, Meriem, 2016. "La gestion structurelle des déficits jumeaux au Maroc et la recherche d’une stratégie d’équilibre [Structural management of twin deficits in Morocco and Finding an equilibrium strategy]," MPRA Paper 71533, University Library of Munich, Germany, revised 2016.
    15. Benjamin A. Friedman & E. Gerald Corrigan & Irvine H. Sprague & Norman Strunk & Joseph A. Grundfest, 1991. "The Risks of Financial Crises," NBER Chapters, in: The Risk of Economic Crisis, pages 19-83, National Bureau of Economic Research, Inc.

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