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(Revised from original 2011 version)
How Government Debt Accumulates
This note discusses the economics of government-debt accumulation. Fiscal deficits are only part of the picture; other factors include the level of debt as a percent of nominal GDP; the interest rate; the inflation rate; the growth rate; and changes in the exchange rate if some debt is owed in a foreign currency. The note discusses how these factors interact to affect government debt levels.
Keywords: Government and Politics;
Borrowing and Debt;
Roscini, Dante, and Jonathan Schlefer. "How Government Debt Accumulates." Harvard Business School Background Note 711-087, February 2013. (Revised from original April 2011 version.)