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Dealing with Debt

57 Pages Posted: 14 Mar 2015  

Carmen Reinhart

Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA); Harvard University - Harvard Kennedy School (HKS)

Vincent R. Reinhart

American Enterprise Institute (AEI)

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 17, 2015

Abstract

This paper explores the menu of options for renormalizing public debt levels relative to nominal activity in the long run, should governments eventually decide to do so. Orthodox ones for medium-term debt stabilization, the standard fare of officialdom, include enhancing growth, running primary budget surpluses, and privatizing government assets. Heterodox polices include restructuring debt contracts, generating unexpected inflation, taxing wealth, and repressing private finance. We examine 70 episodes across 22 advanced economies from 1800 to 2014 where there were significant and sustained reductions in public debt relative to nominal GDP. In the event, advanced countries have relied far more on heterodox approaches than many observers choose to remember.

Keywords: public debt, debt reversals, restructuring, financial repression, inflation, wealth taxes, privatization

JEL Classification: H63, E43

Suggested Citation

Reinhart, Carmen and Reinhart, Vincent R. and Rogoff, Kenneth, Dealing with Debt (February 17, 2015). HKS Working Paper No. RWP15-009. Available at SSRN: https://ssrn.com/abstract=2577359 or http://dx.doi.org/10.2139/ssrn.2577359

Carmen Reinhart (Contact Author)

Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ( email )

79 JFK Street
Cambridge, MA 02138
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617-496-8643 (Phone)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
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Vincent Reinhart

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States

Kenneth Rogoff

Harvard University - Department of Economics ( email )

Littauer Center
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Cambridge, MA 02138
United States
617-495-4022 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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