[PDF] different theoretical views on national debt

Debt Issuance

While a household has a finite lifespan, a government has an indefinite planning horizon. So, while a household must eventually retire its debt, a government can, in principle, refinance (or roll over) its debt indefinitely. Yes, debt has to be repaid when it comes due. But maturing debt can be replaced with newly issued debt. Rolling over the debt...

Debt as Currency

To the extent that the national debt is held domestically, it constitutes domestic private sector wealth. The extent to which it constitutes net wealth can be debated, but there’s not much doubt that at least some of it is viewed in this manner.4See Robert J. Barro.The implication of this is that increasing the national debt makes individuals feel ...

Debt Service

Unlike the U.S. Notes issued in the past, Treasury securities bear interest (or sell at discount, in the case of Treasury bills). So even if the national debt doesn’t have to be paid back, it still needs to be serviced. The interest expense associated with carrying debt is called the carry cost. Debt management strategies employed in government tre...

Monetizing The Debt

The average interest expense of the federal debt is influenced by the composition of the debt between currency, reserves, bills, notes and bonds. The composition of the debt is determined in part by monetary policy. In particular, when the Federal Reserve purchases Treasury securities, it is in effect swapping lower-yielding reserves for higher-yie...

Inflation

The purchasing power of nominal wealth is inversely related to the price level. That is, a higher price level means one’s money buys fewer goods and services. Inflation refers to the rate of change in the price level over time. It is helpful to keep in mind the difference between a change in the price level (a temporary change in the rate of inflat...

Inflation Target

The Federal Reserve has had an official 2% inflation target since 2012. In the recent review of their monetary policy framework, Fed officials expressed the willingness to let inflation overshoot its target if it meant accommodating an improving labor market. However, there is the question of what will happen if inflation rises to and remains above...

View PDF Document


What are the two types of national debt?

The U.S. national debt is made up of two types of debt: debt held by the public and intragovernmental debt. Debt held by the public is what the government owes to Treasury investors. These investors include people in the U.S., international investors, and foreign governments.

Who holds most of the national debt?

A majority of the national debt is held by "the public," which includes individuals, corporations, state or local governments, Federal Reserve Banks, and foreign governments. 3 In other words, debt held by the public includes U.S. government debt held by any entity except the U.S. federal government itself (Figure 2).

How does the national debt affect the government?

The national debt enables the federal government to pay for important programs and services even if it does not have funds immediately available, often due to a decrease in revenue. Decreases in federal revenue coupled with increased government spending further increases the deficit.

What is the difference between government debt and intragovernmental debt?

Debt held by the public is what the government owes to Treasury investors. These investors include people in the U.S., international investors, and foreign governments. Intragovernmental debt is what the federal government owes to other government departments. It funds pensions and other programs, such as Social Security in the U.S.

View PDF Document




DIVERGENT THEORIES OF NATIONAL DEBT - North Carolina

Although the views of different individuals have varied widely in certain debt at the national level of government are readily discernible.



New views on the optimum currency area theory: what is EMU

different directions a weakening of the analytical framework behind the OCA theory thus option of “inflating away” their national debt in the future.



Government debt management in the euro area - recent theoretical

25 mars 2005 short-term government bills partly with a view to establishing benchmarks in that segment of the capital market. Another development in.



The impact of high and growing government debt on economic

From a policy perspective a negative impact of public debt on economic growth strengthens the arguments for ambitious debt reduction through fiscal.



Scholars at Harvard

theory of debt neutrality called Ricardian equivalence. Finally the paper considers the various normative perspectives about how the government should.



Debt Dynamics Fiscal Deficit

https://www.adb.org/sites/default/files/publication/181400/adbi-wp557.pdf





Working Paper Series - Debt rule design in theory and practice: the

In both debates the choice of government debt anchor and the speed of From an economic point of view there is widespread agreement that fiscal policies ...



Sovereign Debt WP/22/122

https://www.imf.org/-/media/Files/Publications/WP/2022/English/wpiea2022122-print-pdf.ashx



Understanding the Macro-Financial Effects of Household Debt: A

when including the past three-year change in the government debt to GDP ratio 10 For a different perspective regarding the distributional aspects of ...