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Re-Thinking Debt Burden: Going with the Flow?

Author

Listed:
  • Vipul Bhatt

    (James Madison University)

  • Andre R. Neveu

    (James Madison University)

Abstract

This paper provides an empirical framework for computing a flow measure of public debt called the debt-to-duration ratio. A ratio of this measure to GDP (DD-to-GDP) is a unit-free measure of debt burden interpreted as the percentage of income for debt service or repayment. Using monthly US Treasury data (1997–2018), we compare this measure to the debt-to-GDP ratio. The DD-to-GDP ratio is an alternative for use in discussions about sustainability of current levels of debt. An empirical test of the relationship between rising debt ratios and growth shows that duration has an important counteracting relationship with higher debt lowering growth but longer duration being associated with higher growth in the medium term.

Suggested Citation

  • Vipul Bhatt & Andre R. Neveu, 2019. "Re-Thinking Debt Burden: Going with the Flow?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(2), pages 179-203, April.
    • Handle: RePEc:pal:easeco:v:45:y:2019:i:2:d:10.1057_s41302-018-0113-x
    DOI: 10.1057/s41302-018-0113-x
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    Cited by:

    1. Akeem Rahaman & Scott Mark Romeo Mahadeo, 2024. "Constructing country-specific debt sustainability indices for developing countries," Working Papers in Economics & Finance 2024-01, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.

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    More about this item

    Keywords

    Debt; Fiscal policy; Duration; Interest rate; Debt management;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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