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A Mountain of Debt: Navigating the Legacy of the Pandemic

  • M. Ayhan Kose EMAIL logo , Franziska Ohnsorge und Naotaka Sugawara
Veröffentlicht/Copyright: 15. September 2022
Journal of Globalization and Development
Aus der Zeitschrift Journal of Globalization and Development Band 13 Heft 2

Abstract

The COVID-19 pandemic has triggered a massive increase in global debt levels and exacerbated the trade-offs between the benefits and costs of accumulating government debt. This paper examines these trade-offs by putting the recent debt boom into a historical context. It reports three major findings. First, during the 2020 global recession, both global government and private debt levels rose to record highs, and at their fastest single-year pace, in five decades. Second, the debt-financed, massive fiscal support programs implemented during the pandemic supported activity and illustrated the benefits of accumulating debt. However, as the recovery gains traction, the balance of benefits and costs of debt accumulation could increasingly tilt toward costs. Third, more than two-thirds of emerging market and developing economies are currently in government debt booms. On average, the current booms have already lasted three years longer, and are accompanied by a considerably larger fiscal deterioration, than earlier booms. About half of the earlier debt booms were associated with financial crises in emerging market and developing economies.

Keywords: COVID-19; fiscal policy; sovereign debt; private debt; deficits
JEL Classification: E32; E62; G01; H63
Corresponding author: M. Ayhan Kose, World Bank, Brookings Institution; CEPR; and CAMA, Washington, DC, USA, E-mail:

Acknowledgments

We thank our discussant, Antonio Fatás, for helpful comments at the Workshop on “Sovereign Debt and Development.” We also thank Carlos Arteta, Kevin Gallagher, Indermit Gill, Sergiy Kasyanenko, Ugo Panizza, Brian Pinto, Andrea Presbitero, Justin Sandefur, Mark Weidemaier, and Charles Wyplosz and workshop participants for feedback. Shijie Shi provided excellent research assistance. The findings, interpretations, and conclusions expressed in this paper are those of the authors. They do not necessarily represent the views of the institutions they are affiliated with.

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Supplementary Material

The online version of this article offers supplementary material (https://doi.org/10.1515/jgd-2021-0052).

Received: 2021-07-05
Accepted: 2022-03-04
Published Online: 2022-09-15

© 2022 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Symposia_Articles
  3. Towards HIPC 2.0? Lessons from Past Debt Relief Initiatives for Addressing Current Debt Problems
  4. A Mountain of Debt: Navigating the Legacy of the Pandemic
  5. Policy Analysis
  6. Debt Dynamics in Emerging and Developing Economies: Is R − G a Red Herring?
  7. Symposia_Article
  8. The Political Economy of Bilateral Lending from Emerging Creditors
  9. Research Foundation
  10. The Odious Haitian Independence Debt
  11. Policy Analysis
  12. On the Potential of Sovereign State-Contingent Debt in Contributing to Better Public Debt Management and Enhancing Sustainability Outcomes
  13. Symposia_Article
  14. Overcoming Original Sin
  15. Symposium
  16. Sovereign Debt Restructuring: The Way Forward
https://doi.org/10.1515/jgd-2021-0052
Schlagwörter für diesen Artikel
COVID-19; fiscal policy; sovereign debt; private debt; deficits

Artikel in diesem Heft

  1. Frontmatter
  2. Symposia_Articles
  3. Towards HIPC 2.0? Lessons from Past Debt Relief Initiatives for Addressing Current Debt Problems
  4. A Mountain of Debt: Navigating the Legacy of the Pandemic
  5. Policy Analysis
  6. Debt Dynamics in Emerging and Developing Economies: Is R − G a Red Herring?
  7. Symposia_Article
  8. The Political Economy of Bilateral Lending from Emerging Creditors
  9. Research Foundation
  10. The Odious Haitian Independence Debt
  11. Policy Analysis
  12. On the Potential of Sovereign State-Contingent Debt in Contributing to Better Public Debt Management and Enhancing Sustainability Outcomes
  13. Symposia_Article
  14. Overcoming Original Sin
  15. Symposium
  16. Sovereign Debt Restructuring: The Way Forward
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