{
  "title": "Public Debt and r - g at Risk",
  "publication": "IMF Working Papers, July 24, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/07/24/public-debt-and-r-g-at-risk-49586",
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  "summary": "As interest rate-growth differentials (r-g) turned negative in many countries, governments consider pursuing fiscal expansion and the potential risks involved.",
  "sections": [
    {
      "heading": "Key findings on r - g dynamics and public debt",
      "content": "- High public debts can lead to adverse future r - g dynamics.\n- Countries with higher initial public debt experience:\n  - (i) a shorter duration of negative r - g episodes and a higher probability of reversal.\n  - (ii) higher average r - g.\n  - (iii) a more right-skewed r - g distribution, implying higher down-side risks.\n- High-debt countries experience larger increases in interest rates in response to:\n  - (iv) an unexpected decline in domestic output.\n  - (v) an increase of global volatility."
    },
    {
      "heading": "Sample and scope",
      "content": "- Analysis uses a large sample of advanced and emerging economies.\n- Results are stronger when public debts are denominated in foreign currencies."
    },
    {
      "heading": "Thematic implications for fiscal policy and risk assessment",
      "content": "- The combination of elevated public debt and negative r - g episodes does not guarantee persistent low financing costs; high debt can increase the likelihood and scale of adverse r - g reversals.\n- Currency denomination of public debt matters: foreign-currency debt amplifies the sensitivity of interest rates to domestic output shocks and global volatility.\n- Fiscal expansion decisions should account for:\n  - higher average r - g and greater downside tail risk in high-debt settings,\n  - the elevated interest-rate response to domestic and global shocks, especially with foreign-currency debt exposure.\n\nWeicheng Lian, Andrea F Presbitero, Ursula Wiriadinata. July 24, 2020.\n\n---\n\n Content in this bundle\n\n- 3.1    Public Debt, Negativer-gSpells, and Reversals\n  - 3.1    Public Debt, Negativer-gSpells, and Reversals (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 3.1    Public Debt, Negativer-gSpells, and Reversals (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/07/24/public-debt-and-r-g-at-risk-49586"
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    "Authors: Weicheng Lian, Andrea F Presbitero, Ursula Wiriadinata",
    "Published: July 24, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513550794.001",
    "High public debts can lead to adverse future r - g dynamics.",
    "Countries with higher initial public debt experience:",
    "High-debt countries experience larger increases in interest rates in response to:",
    "Analysis uses a large sample of advanced and emerging economies.",
    "Results are stronger when public debts are denominated in foreign currencies.",
    "The combination of elevated public debt and negative r - g episodes does not guarantee persistent low financing costs; high debt can increase the likelihood and scale of adverse r - g reversals.",
    "Currency denomination of public debt matters: foreign-currency debt amplifies the sensitivity of interest rates to domestic output shocks and global volatility.",
    "Fiscal expansion decisions should account for:",
    "**3.1    Public Debt, Negativer-gSpells, and Reversals**"
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