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Revisiting the Driving Forces of Public Debt Ratio Fluctuations: The Role of Structural Shocks and Policy Regimes

Accounting-based debt decomposition attributes changes in the U.S. debt-to-GDP ratio to high inflation in the 1970s, rising interest rates in the 1980s, and primary surpluses in the 1990s. However, such framework is unable to formally identify the underlying causes and their evolving transmission channels across policy regimes. […]