Can This Time Be Different? Policy Options in Times of Rising Debt

Franziska Ohnsorge, Ayhan Kose, Peter Nagle and Naotaka Sugawara

No 14528, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Episodes of debt accumulation have been a recurrent feature of the global economy over the past fifty years. Since 2010, emerging and developing economies have experienced another wave of historically large and rapid debt accumulation. Similar past debt buildups have often ended in widespread financial crises in these economies. This paper examines the factors that are likely to determine the outcome of the most recent debt wave, and considers policy options to help reduce the likelihood that it ends again in widespread crises. It reports two main results. First, the rapid increase in debt has made emerging and developing economies more vulnerable to shifts in market sentiment, notwithstanding historically low global interest rates. Second, policy options are available to lower the likelihood of financial crises, and to help manage the adverse impacts of crises when they do occur. These include sound debt management, strong monetary and fiscal frameworks, and robust bank supervision and regulation. The post-crisis debt buildup has coincided with a period of subdued growth as well as the emergence of non-traditional creditors. As a result, policy priorities also need to ensure that debt is spent on productive purposes to improve growth prospects and that all debt-related transactions are transparently reported.

Keywords: Financial crises; Currency crises; Debt crises; Banking crises; Public debt; Private debt; External debt (search for similar items in EconPapers)
JEL-codes: E32 E62 F34 G01 H12 H63 N20 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP14528 (application/pdf)

Related works:
Working Paper: Can this time be different? Policy options in times of rising debt (2020)
Working Paper: Can This Time Be Different? Policy Options in Times of Rising Debt (2020)
Working Paper: Can This Time Be Different ? Policy Options in Times of Rising Debt (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14528

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14528

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().