SPECIFIC ASPECTS OF THE GLOBAL BUBBLE OF PUBLIC DEBT

Ivan Luchian and Aurelia Tepordei
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Ivan Luchian: International Institute of Management IMI-NOVA, Chisinau, Republic of Moldova
Aurelia Tepordei: International Institute of Management IMI-NOVA, Chisinau, Republic of Moldova

Journal of Financial and Monetary Economics, 2019, vol. 7, issue 1, 62-70

Abstract: Debts are a basic practice and a solution for any functional economy. Governments are lending money to finance projects such as roads, hospitals, schools and to fulfill promises on reducing taxes. The ratio of general public debt to GDP has increased in most states over the last 10 years. The governments of several states take advantage of the low level of the interest rate and collect the debts that inevitably become overwhelming. Under conditions of exaggeration, it becomes a factor of destabilizing financial situation within both the country and international financial market. Currently, we can talk about the formation of a financial bubble based on increasing government debt. Based on this, the existence and evolution of public debt bubble requires the correction of financial policies in developing countries in relation to systemic risk management in domestic financial market and in formulation and promotion of national debt management policy.

Keywords: financial bubble; global debt; public debt; Gross Domestic Product (search for similar items in EconPapers)
JEL-codes: E61 E62 H62 H63 (search for similar items in EconPapers)
Date: 2019
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