The Aftermath of Debt Surges

DATE: 2022-08-01

By Kose, M. Ayhan, Franziska L. Ohnsorge, Carmen M. Reinhart, and Kenneth S. Rogoff,

Annual Review of Economics Vol. 14 (Aug 2022): pp. 637-663.

Date published: Aug 2022 (Annual Review of Economics)



Debt in emerging markets and developing economies is at its highest level in half a century. In about 9 in 10 emerging markets and developing economies, debt is higher now than it was in 2010, and in half of the emerging markets and developing economies, debt is more than 30 percentage points of GDP higher than in 2010. This article reviews a menu of options that in the past have helped lower debt burdens. It examines orthodox options (enhancing growth, fiscal consolidation, privatization, and wealth taxation) and heterodox options (inflation, financial repression, and debt default and restructuring). The mix of feasible options depends on country characteristics and the type of debt. However, none of these options comes without political, economic, and social costs. The challenges associated with debt reduction raise questions of global governance, including to what extent advanced economies can better support emerging market and developing economies in cushioning prospective shocks.



debt restructuring, growth, inflation, fiscal consolidation, financial repression, wealth taxes

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