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{{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 ==
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<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}}−1). Hence, the left side of the equation shows the ''change'' in the debt-to-GDP ratio. The right hand side of the equation shows the causes of the government's debt.{{Dubious|date=August 2018}} <math display="inline">(r-g)(\frac{B_{t-1}}{Y_{t-1}})</math> is the interest payments on the stock of debt as a ratio of GDP so far,{{Citation
If the government has the ability to [[Money creation|print money]], and therefore [[Monetizing debt|monetize]] the outstanding debt, the budget constraint becomes:
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<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 needed|date=August 2018}}
The term <math display="inline">\frac{M_t}{Y_t}-\frac{M_{t-1}}{Y_{t-1}}</math> is the change in money balances (i.e. money growth). By printing money the government is able to increase nominal money balances to pay off the debt (consequently acting in the debt way that debt financing does, in order to balance the government's expenditures).{{Clarify|date=August 2018}} However, the effect that an increase in nominal money balances has on [[Seigniorage|seignorage]] is ambiguous, as while it increases the amount of money within the economy, the real value of each unit of money decreases due to inflationary effects. This inflationary effect from money printing is called an [[inflation tax]].<ref>{{
== 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 "a country can be said to achieve external debt sustainability if it can meet its current and future external debt service obligations in full, without recourse to debt rescheduling or the accumulation of arrears and without compromising growth".{{Citation
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.
▲== Global statistics ==
{{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==
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{{Reflist}}
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