Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom


Eight hundred years of financial folly

A new historical database on debt and banking crisis is showing that we might be in a trivial, rather than exceptional economic situation regarding government debt. Kenneth Rogoff and Carmen Reinhart, the authors of the database and the connected study are showing that over the longer sweep of history governments regularly resorted to defaulting or at least restructuring their “uncomfortable” government debt. After the Great Depression, over 40% of the countries did so, and after the 1980-82 recession, 30% of the countries did it.

The authors confirm the correlation of external financing of the debt (like for example in the US today) and the higher exposition to a debt crisis, but also inflation and poor economic performance. An interesting reading for French politicians in the eve of the “big loan” planned by the government…

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