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Re-Thinking Debt Burden: Going with the Flow?

  • Vipul Bhatt
  • Andre R. NeveuEmail author
Original Article
  • 13 Downloads

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.

Keywords

Debt Fiscal policy Duration Interest rate Debt management 

JEL Classification

E62 E66 E6 

Notes

Acknowledgements

The authors wish to thank Adam Diehl for his helpful assistance.

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Copyright information

© EEA 2018

Authors and Affiliations

  1. 1.James Madison UniversityHarrisonburgUSA

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