DP17172 How might the UK's Debt-GDP ratio be reduced? Evidence from the last 120 years

Author(s):	Michael R. Wickens
Publication Date:	April 2022
Keyword(s):	Debt-GDP ratio, growth, inflation, primary deficit
JEL(s):	E62, H63
Programme Areas:	Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=17172

The motivation for this paper is concerns in the UK with how to bring down the currently high level of the debt-GDP ratio. We consider whether anything can be learned from previous experience over the last 120 years by examining the contributions both to the increase in the debt-GDP ratio and to the reduction of the debt-GDP ratio of various components of the government budget constraint: the primary deficit, growth, inflation and interest rates and payments. We also examine the effectiveness of policy in influencing these components. We conclude by suggesting a combination of these components that might be economically and politically achievable.