Background Note | HBS Case Collection | April 2011 (Revised February 2013)

How Government Debt Accumulates

by Dante Roscini and Jonathan Schlefer

Abstract

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;

Citation:

Roscini, Dante, and Jonathan Schlefer. "How Government Debt Accumulates." Harvard Business School Background Note 711-087, April 2011. (Revised February 2013.)