 How to escape from the debt trap: Lessons from the pastThomas Mayer and Gunther Schnabl The World Economy, 2023, vol. 46, issue 4, 991-1016 Abstract: Rising public debt everywhere has raised the question of how to reduce debt again in the future. High public debt also seems to be an impediment for the exit of central banks from ultra‐low interest rates and quantitative easing. Historical precedents and proposals have included austerity, haircuts and the generation of inflation. Each way has advantages and disadvantages, including uncertainty about effects and side effects. We approach the issue from an historical perspective, based on case studies of prominent approaches to debt reduction. We analyse debt reduction through economic austerity in Italy, hyperinflation in Germany after World War I, inflation in Argentina since the 1980s, currency reform in Germany after WW II, and financial repression in the United States and the United Kingdom after WW II. Finally, we discuss Ronald McKinnon's order of economic and financial liberalisation as well as the Chicago Plan combined with the introduction of central bank digital currencies as an option for the future. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:46:y:2023:i:4:p:991-1016 Ordering information: This journal article can be ordered from Access Statistics for this article The World Economy is currently edited by David Greenaway More articles in The World Economy from Wiley Blackwell |
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