Julia Estefania Flores, Davide Furceri, Siddharth Kothari, Jonathan D. Ostry, 28 May 2021

Public debt ratios have increased significantly in 2020 from already elevated levels. Current projections envisage a quick stabilisation and subsequent decline in debt ratios. This column assesses the likelihood of this projection by looking at past evidence on forecast accuracy, based on a new comprehensive dataset of medium-term debt forecasts. It finds that forecasts have systematically understated the actual evolution of debt. If the past is a guide to the future, rather than declining, debt ratios could be some 7% of GDP higher five years from now than they are today in emerging and developing countries.

Emmanuel Farhi, Matteo Maggiori, 20 December 2017

The US has been leveraging itself in recent decades, piling up public and external debt – a trend that could jeopardise the special position the dollar occupies in the international monetary system. This column argues that the US is risking another ‘Triffin’ event, in the form of a confidence crisis and a run on the dollar. The current situation echoes that of the UK in the 1920s and the US in the 1960s. The crises that ended both episodes marked dramatic turning points in the history of the international monetary system.

Olivier Blanchard, Paolo Mauro, Julien Acalin, 16 February 2016

One of the legacies of the Global Crisis is a high ratio of public debt to GDP. While current levels may be sustainable, another series of bad shocks could easily tip the balance and lead to unsustainable debt ratios. This column argues that against this background, growth-indexed bonds can help. By decreasing payments when growth is low, they can substantially reduce the upper tail of the distribution of the debt ratio and lessen the risk of a debt explosion. 


CEPR Policy Research