Question:
The debt-GDP ratio in Belgium exceeded 120% in the early 1990s and has fallen to just over 80% more recently. Italy had a debt-GDP ratio of about 100% even before the euro crisis. The rapid rise in Japans debt-GDP ratio was shown in Figure 18.4. Yet none of these economies experienced defaults or high inflation. In contrast, the debt-GDP ratio in Argentina peaked at 65% (up from 35% in 1996) and then a crisis struck, leading to default and other macroeconomic problems. How, broadly speaking, do we understand these very different outcomes?
Transcribed Image Text:
FIGURE 18.4 Debt-GDP Ratios around the World Percentage of GDP 120 100 Japan 80 60 Euro area 40 U.S. 20 1934 1996 1998 2000 2002 2004 2006 200 20102012 Year