Content deleted Content added
Scottjduffy (talk | contribs) m Update some stats |
Undid revision 1230566940 by HighlyOrthodox (talk)Reverted good faith WP:GF edit. WP:UNDUE amount of content sourced to ONE article from the MMT (fringe economics) perspective. |
||
| (46 intermediate revisions by 29 users not shown) | |||
Line 1:
{{Short description|Economic assessment of a country's debt}}
[[File:Gdp to debt ratio.svg|thumb|450px|lang=en|Heatmap of the development of debt-to-GDP ratio for some European countries, in percent of GDP from 1995 to 2017.]]
In [[economics]], the '''debt-to-GDP ratio''' is the [[ratio]] between a country's [[government debt]] (measured in units of currency) and its [[gross domestic product]] (GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates that an economy
It should not be confused with a '''deficit-to-GDP ratio''', which, for countries running budget deficits, measures a country's annual net fiscal loss in a given year ([[Government budget balance|total expenditures minus total revenue]], or the net change in debt per annum) as a percentage share of that country's GDP; for countries running budget surpluses, a ''surplus-to-GDP ratio'' measures a country's annual net fiscal ''gain'' as a share of that country's GDP.
== Global Statistics ==▼
At the end of the 4th quarter of 2019, [[United States public debt]]-to-GDP ratio was at 106.7%.<ref name=freddata>[https://fred.stlouisfed.org/series/GFDEGDQ188S Federal Debt: Total Public Debt as Percent of Gross Domestic Product] Federal Bank of St. Louis.</ref>▼
Two-thirds of US public debt is owned by US citizens, banks, corporations, and the [[Federal Reserve Bank]];<ref name=USforeigncreditors>▼
{{cite news▼
|url=https://www.nytimes.com/imagepages/2011/07/19/business/2110719_yuan_graphic.html?ref=business▼
|work=[[The New York Times]]▼
|date=19 July 2011▼
|title=America's Foreign Creditors▼
}}</ref> approximately one-third of US public debt is held by foreign countries – particularly China and Japan. Conversely, less than 5% of Italian and Japanese public debt is held by foreign countries.▼
Particularly in [[macroeconomics]], various debt-to-GDP ratios can be calculated. The most commonly used ratio is the [[government debt]] divided by the gross domestic product (GDP), which reflects the government's finances, while another common ratio is the total debt to GDP, which reflects the finances of the nation as a whole.
The debt-to-GDP ratio is technically not a [[dimensionless quantity]], but a unit of [[time]], being equal to the amount of years over which the accumulated economic product equals the debt.
== Changes ==
The change in debt-to-GDP is approximately "net change in debt as percentage of GDP";{{Dubious|date=August 2018}}
This is only approximate as GDP changes from year to year, but generally, year-on-year GDP changes are small (say, 3%),{{Citation
However, in the presence of significant [[inflation]], or particularly [[hyperinflation]], GDP may increase rapidly in nominal terms; if debt is nominal, then its ratio to GDP will decrease rapidly. A period of [[deflation]] would have the opposite effect.{{Citation
A government's debt-to-GDP ratio can be analysed by looking at how it changes or, in other words, how the debt is evolving over time:
Line 35 ⟶ 21:
<math display="block">\frac{B_t}{Y_t} - \frac{B_{t-1}}{Y_{t-1}}=(r-g)\left(\frac{B_{t-1}}{Y_{t-1}}\right)+\left(\frac{G_t-T_t}{Y_t}\right)</math>{{Clarify |reason=Variables not defined|date=August 2018}}
The left hand side of the equation demonstrates the dynamics of the government's debt. <math display="inline">\frac{B_t}{Y_t}</math> is the debt-to-GDP at the end of the period {{var|t}}, and <math display="inline">\frac{B_{t-1}}{Y_{t-1}}</math> is the debt-to-GDP ratio at the end of the previous period ({{var|t
If the government has the ability to [[Money creation|print money]], and therefore [[Monetizing debt|monetize]] the outstanding debt, the budget constraint becomes:
<math display="block">\left(\frac{B_t}{Y_t} - \frac{B_{t-1}}{Y_{t-1}}\right)+\left(\frac{M_t}{Y_t}-\frac{M_{t-1}}{Y_{t-1}}\right) =(r-g)\left(\frac{B_{t-1}}{Y_{t-1}}\right)+\left(\frac{G_t-T_t}{Y_t}\right)</math>{{Citation
The term <math display="inline">\frac{M_t}{Y_t}-\frac{M_{t-1}}{Y_{t-1}}</math>
== Applications ==
Debt-to-GDP measures the [[financial leverage]] of an economy.{{Citation
One of the [[Euro convergence criteria]] was that government debt-to-GDP should be below 60%.<ref>{{
The World Bank and the IMF hold that
In 2013 [[Thomas Herndon|Herndon]], Ash, and [[Robert Pollin|Pollin]] reviewed an influential, widely cited research paper entitled, "[[Growth in a Time of Debt]]",<ref name=reuters18April2013>{{cite news|title=How a student took on eminent economists on debt issue - and won|date=18 April 2013|first=Edward|
There is a difference between external debt denominated in domestic currency, and external debt denominated in foreign currency. A nation can service external debt denominated in domestic currency by tax revenues, but to service foreign currency debt it has to convert tax revenues in the [[foreign exchange market]] to foreign currency, which puts downward pressure on the value of its currency.
{{See also|National debt of Japan}}
[[File:Debt to GDP.webp|thumb|300px|Debt to GDP for the [[United States]]
{{legend|#FFD932|[[List of states and territories of the United States|State]] and [[Local government in the United States|local]] debt to GDP}}
{{legend|#EE220C|[[Federal government of the United States|Federal]] debt to GDP}}
]]
[[File:European debt to GDP ratios.webp|thumb|300px|European debt to GDP ratios
{{legend-line|#001489 solid 3px|[[Greece]] }}
{{legend-line|#CD212A solid 3px|[[Italy]] }}
{{legend-line|#F1BF00 solid 3px|[[Spain]] }}
{{legend-line|#046A38 solid 3px|[[Portugal]] }}
{{legend-line|#970E53 solid 3px|[[France]] }}
{{legend-line|#FF8200 solid 3px|[[Ireland]] }}
{{legend-line|#000000 solid 3px|[[Germany]] }}
{{see also|European debt crisis}}
]]
▲At the end of the
According to the IMF World Economic Outlook Database (April 2021),<ref>International Monetary Fund: [https://www.imf.org/en/Publications/WEO/weo-database/2021/April World Economic Outlook Database''General government gross debt''(Percent of GDP)] {{Webarchive|url=https://web.archive.org/web/20210407050829/https://www.imf.org/en/Publications/WEO/weo-database/2021/April |date=2021-04-07 }}</ref> the level of Gross Government debt-to-GDP ratio in Canada was 116.3%, in China 66.8%, in India 89.6%, in Germany 70.3%, in France 115.2% and in the United States 132.8%.
▲Two-thirds of US public debt is owned by US citizens, banks, corporations, and the [[Federal Reserve Bank]];<ref name=USforeigncreditors>
▲{{cite news
▲|url=https://www.nytimes.com/imagepages/2011/07/19/business/2110719_yuan_graphic.html?ref=business
▲|work=[[The New York Times]]
▲|date=19 July 2011
▲|title=America's Foreign Creditors
▲}}</ref> approximately one-third of US public debt is held by foreign countries – particularly China and Japan.
==See also==
* [[
* [[Debt levels and flows]]
* [[Debt ratio]], for companies
* [[Debt-to-income ratio]], for households
* [[Leverage (finance)]]
* [[List of countries by public debt]]
* [[List of countries by external debt]]
* [[List of
==References==
Line 70 ⟶ 81:
{{Reflist}}
[[Category:
| |||