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