A Decade of Debt

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95

Policy Analyses in International Economics 2011

A Decade of Debt Carmen M. Reinhart and Kenneth S. Rogoff

PE TERSON I N S T I T U T E F O R I N T E R N AT I O N A L E CO N O M I C S

A Decade of Debt Carmen M. Reinhart and Kenneth S. Rogoff

PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS Washington, DC September 2011

Carmen M. Reinhart is the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics. She was previously professor of economics and director of the Center for International Economics at the University of Maryland. She was chief economist and vice president at the investment bank Bear Stearns in the 1980s and spent several years at the International Monetary Fund. She is a research associate at the National Bureau of Economic Research, research fellow at the Centre for Economic Policy Research, and member of the Congressional Budget Office Panel of Economic Advisers and Council on Foreign Relations. She has served on many editorial boards and has frequently testified before Congress. Reinhart’s work has helped to inform the understanding of financial crises for over a decade. Her numerous papers on macroeconomics, international finance, and trade have been published in leading scholarly journals. She is the recipient of the 2010 TIAA-CREF Paul A. Samuelson Award. Her best-selling book (with Kenneth S. Rogoff) entitled This Time is Different: Eight Centuries of Financial Folly, which has been translated into 13 languages, documents the striking similarities of the recurring booms and busts that have characterized financial history. She received her PhD from Columbia University. Kenneth S. Rogoff is a member of the Peterson Institute for International Economics Advisory Committee and the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. He also served as chief economist and director of research at the International Monetary Fund (2001–03). He is the recipient of the 2010 TIAA-CREF Paul A. Samuelson Award. His publications include This Time is Different: Eight Centuries of Financial Folly, Handbook of International Economics Volume III, and Foundations of International Macroeconomics. Rogoff is a frequent commentator for NPR, the Wall Street Journal, and the Financial Times.

PETER G. PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS 1750 Massachusetts Avenue, NW Washington, DC 20036-1903 (202) 328-9000 FAX: (202) 659-3225 www.piie.com C. Fred Bergsten, Director Edward A. Tureen, Director of Publications, Marketing, and Web Development Printing by United Book Press, Inc. Copyright © 2011 by the Peter G. Peterson Institute for International Economics. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without permission from the Institute. For reprints/permission to photocopy please contact the APS customer service department at Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923; or email requests to: [email protected] Printed in the United States of America. 13

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Library of Congress Cataloging-inPublication Data Reinhart, Carmen M. A decade of debt / Carmen M. Reinhart and Kenneth S. Rogoff. p. cm. Includes bibliographical references and index. ISBN 978-0-88132-622-2 1. Debts, Public. 2. Finance, Public. I. Rogoff, Kenneth S. II. Title. HJ8015.R45 2011 336.3’4--dc23 2011024349

The views expressed in this publication are those of the authors. This publication is part of the overall program of the Institute, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual members of the Board or the Advisory Committee.

Contents

Preface

xiii

Acknowledgments

xvii

Executive Summary

xix

1 A Decade of Debt

Introduction Surges in Public Debt The Financial Crash—Sovereign Debt Crisis Sequence Debt and Growth Aftermath of High Debt: The 1930s and World War II Conclusion References

2 Chartbook of Country Histories of Debt, Default, and Financial Crises Preamble Key to Figures and Methodology Notes Debt and Crises: Main Themes References

1

1 4 9 20 29 33 35

39 39 40 42 45

About the Authors

153

Index

155

iii

Tables

Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 2.14 Table 2.15 Table 2.16 Table 2.17 Table 2.18 iv

Public debt and sovereign default and restructuring: All countries, 1824–2009 Public debt and sovereign default and restructuring: Advanced economies, 1880–2009 Real GDP growth as the level of government debt varies: Selected advanced economies, 1790–2009 Selected episodes of domestic debt default or restructuring, 1920s–40s Debt liquidation through financial repression: Italy, United Kingdom, and United States, 1945–55 Algeria: Default, restructuring, banking crises, growth collapses, and IMF programs, 1962–2009 Angola: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1975–2009 Argentina: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1816–2009 Australia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2010 Austria: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009 Belgium: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009 Bolivia: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1825–2009 Brazil: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1822–2009 Bulgaria: Default, restructuring, banking crises, growth collapses, and IMF programs, 1916–2009 Canada: Default, restructuring, banking crises, growth collapses, and IMF programs, 1867–2009 Central African Republic: Default, restructuring, banking crises, growth collapses, and IMF programs, 1960–2009 Chile: Default, restructuring, banking crises, growth collapses, and IMF programs, 1818–2009 China: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1850–2009 Colombia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1819–2009 Costa Rica: Default, restructuring, banking crises, growth collapses, and IMF programs, 1838–2009 Cote D’Ivoire: Default, restructuring, banking crises, growth collapses, and IMF programs, 1960–2009 Denmark: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009 Dominican Republic: Default, restructuring, banking crises, growth collapses, and IMF programs, 1844–2009

11 17 24 30 32 47 48 49 51 53 55 56 57 59 60 62 63 65 67 69 70 71 72

Table 2.19 Table 2.20 Table 2.21 Table 2.22 Table 2.23 Table 2.24 Table 2.25 Table 2.26 Table 2.27 Table 2.28 Table 2.29 Table 2.30 Table 2.31 Table 2.32 Table 2.33 Table 2.34 Table 2.35 Table 2.36 Table 2.37 Table 2.38 Table 2.39 Table 2.40 Table 2.41

Ecuador: Default, restructuring, banking crises, growth 73 collapses, and IMF programs, 1830–2009 Egypt: Default, restructuring, banking crises, growth 75 collapses, and IMF programs, 1800–2009 El Salvador: Default, restructuring, banking crises, growth 76 collapses, and IMF programs, 1838–2009 Finland: Default, restructuring, banking crises, growth 78 collapses, and IMF programs, 1800–2009 France: Default, restructuring, banking crises, growth 80 collapses, and IMF programs, 1800–2009 Germany: Default, restructuring, banking crises, growth 81 collapses, hyperinflation, and IMF programs, 1800–2009 Ghana: Default, restructuring, banking crises, growth 83 collapses, and IMF programs, 1957–2009 Greece: Default, restructuring, banking crises, growth 84 collapses, hyperinflation, and IMF programs, 1829–2009 Guatemala: Default, restructuring, banking crises, growth 86 collapses, and IMF programs, 1838–2009 Honduras: Default, restructuring, banking crises, growth 87 collapses, and IMF programs, 1838–2009 Hungary: Default, restructuring, banking crises, growth 88 collapses, hyperinflation, and IMF programs, 1918–2009 Iceland: Default, restructuring, banking crises, growth 89 collapses, and IMF programs, 1918–2009 India: Default, restructuring, banking crises, growth 91 collapses, and IMF programs, 1835–2009 Indonesia: Default, restructuring, banking crises, growth 92 collapses, hyperinflation, and IMF programs, 1800–2009 Ireland: Default, restructuring, banking crises, growth 94 collapses, and IMF programs, 1919–2009 Italy: Default, restructuring, banking crises, growth 96 collapses, and IMF programs, 1800–2009 Japan: Default, restructuring, banking crises, growth 97 collapses, hyperinflation, and IMF programs, 1800–2009 Kenya: Default, restructuring, banking crises, growth 99 collapses, and IMF programs, 1963–2009 Korea: Default, restructuring, banking crises, growth 100 collapses, and IMF programs, 1945–2009 Malaysia: Default, restructuring, banking crises, growth 102 collapses, and IMF programs, 1963–2009 Mauritius: Default, restructuring, banking crises, growth 104 collapses, and IMF programs, 1968–2009 Mexico: Default, restructuring, banking crises, growth 105 collapses, and IMF programs, 1821–2009 Morocco: Default, restructuring, banking crises, growth 107 collapses, and IMF programs, 1956–2009 v

Table 2.42 Table 2.43 Table 2.44 Table 2.45 Table 2.46 Table 2.47 Table 2.48 Table 2.49 Table 2.50 Table 2.51 Table 2.52 Table 2.53 Table 2.54 Table 2.55 Table 2.56 Table 2.57 Table 2.58a Table 2.5b Table 2.59 Table 2.60 Table 2.61 Table 2.62 Table 2.63 vi

Myanmar: Default, restructuring, banking crises, growth 108 collapses, and IMF programs, 1948–2009 Netherlands: Default, restructuring, banking crises, 109 growth collapses, and IMF programs, 1800–2009 New Zealand: Default, restructuring, banking crises, 110 growth collapses, and IMF programs, 1907–2009 Nicaragua: Default, restructuring, banking crises, growth 112 collapses, hyperinflation, and IMF programs, 1838–2009 Nigeria: Default, restructuring, banking crises, growth 113 collapses, and IMF programs, 1960–2009 Norway: Default, restructuring, banking crises, growth 114 collapses, and IMF programs, 1800–2009 Panama: Default, restructuring, banking crises, growth 116 collapses, and IMF programs, 1903–2009 Paraguay: Default, restructuring, banking crises, growth 117 collapses, and IMF programs, 1811–2009 Peru: Default, restructuring, banking crises, growth 118 collapses, hyperinflation, and IMF programs, 1821–2009 Philippines: Default, restructuring, banking crises, 120 growth collapses, and IMF programs, 1946–2009 Poland: Default, restructuring, banking crises, growth 122 collapses, hyperinflation, and IMF programs, 1918–2009 Portugal: Default, restructuring, banking crises, growth 124 collapses, and IMF programs, 1800–2009 Romania: Default, restructuring, banking crises, growth 125 collapses, and IMF programs, 1878–2009 Russia: Default, restructuring, banking crises, growth 126 collapses, hyperinflation, and IMF programs, 1800–2009 Singapore: Default, restructuring, banking crises, growth 128 collapses, and IMF programs, 1965–2009 South Africa: Default, restructuring, banking crises, 129 growth collapses, and IMF programs, 1800–2009 Spain: Domestic default/restructuring, external default, 131 banking crises, and hyperinflation, 1550–1799 Spain: Default, restructuring, banking crises, growth 132 collapses, and IMF programs, 1800–2009 Sri Lanka: Default, restructuring, banking crises, growth 134 collapses, and IMF programs, 1948–2009 Sweden: Default, restructuring, banking crises, growth 135 collapses, and IMF programs, 1800–2009 Switzerland: Default, restructuring, banking crises, 137 growth collapses, and IMF programs, 1800–2009 Thailand: Default, restructuring, banking crises, growth 138 collapses, and IMF programs, 1800–2009 Tunisia: Default, restructuring, banking crises, growth 140 collapses, and IMF programs, 1956–2009

Table 2.64 Table 2.65 Table 2.66 Table 2.67 Table 2.68 Table 2.69 Table 2.70

Figures

Figure 1.1 Figure 1.2 Figure 1.3 Figure 1.4 Figure 1.5 Figure 1.6 Figure 1.7 Figure 1.8 Figure 1.9 Figure 1.10 Figure 2.1 Figure 2.2 Figure 2.3a

Turkey: Default, restructuring, banking crises, growth 141 collapses, and IMF programs, 1800–2009 United Kingdom: Default, restructuring, banking crises, 143 growth collapses, and IMF programs, 1800–2009 United States: Default, restructuring, banking crises, 145 growth collapses, and IMF programs, 1790–2009 Uruguay: Default, restructuring, banking crises, growth 148 collapses, and IMF programs, 1811–2009 Venezuela: Default, restructuring, banking crises, growth 150 collapses, and IMF programs, 1829–2009 Zambia: Default, restructuring, banking crises, growth 151 collapses, and IMF programs, 1964–2009 Zimbabwe: Default, restructuring, banking crises, growth 152 collapses, hyperinflation, and IMF programs, 1965–2009 Gross central and government debt as a percent of GDP: Advanced and emerging-market economies, 1860–2010 Cumulative increase in public debt in the three years following systemic banking crisis: Selected post–World War II episode Cumulative increase in real public debt since 2007, selected countries Sovereign default on external debt, total (domestic plus external) public debt, and inflation crises: World aggregates, 1826–2010 Greece: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1848–2009 Iceland and Ireland: Public debt/GDP and external debt Sovereign default on external debt, total (domestic plus external) public debt, and systemic banking crises: Advanced economies, 1880–2010 Debt and real per capita GDP growth: Selected advanced and emerging-market economies, 1946–2009 The 90 percent debt/GDP threshold: 1946–2009, advanced economies probability density function Total (public and private) credit market debt outstanding: United States, 1916–2010Q1 Algeria: External (public plus private) debt, default, and banking crises, 1970–2009 Angola: External (public plus private) debt, default, hyperinflation, and banking crises, 1975–2009 Argentina: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1824–2009

6 7 8 10 12 14 16 22 26 34 47 48 49

vii

Figure 2.3b Figure 2.3c Figure 2.4a Figure 2.4b Figure 2.5a Figure 2.5b Figure 2.6 Figure 2.7 Figure 2.8a Figure 2.8b Figure 2.9 Figure 2.10a Figure 2.10b Figure 2.11 Figure 2.12a Figure 2.12b Figure 2.13a Figure 2.13b Figure 2.13c Figure 2.14a Figure 2.14b Figure 2.15 Figure 2.16 viii

Argentina: Private capital inflows from the United 50 Kingdom, default, devaluation, and banking crises, 1865–95 Argentina banking survey: Domestic credit, default, 50 hyperinflation, and banking crises, 1970–2008 Australia: Central government (domestic plus external) 51 debt, near-default, and banking crises, 1852–2009 Australia: Private capital inflows from the United 52 Kingdom and banking crises, 1865–95 Austria: Central government (domestic plus external) debt, 53 default, and banking crises, 1880–2009 Austria: Private capital inflows from the United Kingdom 54 and banking crises, 1865–1914 Belgium: Central government (domestic plus external) 55 debt and banking crises, 1835–2009 Bolivia: Central government (domestic plus external) debt, 56 default, banking crises, and hyperinflation, 1914–2009 Brazil: External debt, default, hyperinflation, and banking 57 crises, 1824–2009 Brazil: Private capital inflows from the United Kingdom 58 and default and banking crises, 1875–1914 Bulgaria: Central government (domestic plus external) 59 debt, default, and banking crises, 1919–2009 Canada: Central government (domestic plus external), 60 1867–2009 Canada: Private capital inflows from the United Kingdom 61 and banking crises, 1865–1914 Central African Republic: External (public plus private) 62 debt, default, devaluation, and banking crises, 1970–2009 Chile: Central government (domestic plus external) debt, 63 default, and banking crises, 1826–2009 Chile: Total (public and private) capital inflows from the 64 United Kingdom, default, and banking crises, 1865–1914 China: Central government (domestic plus external) debt, 65 default, and banking crises, 1885–1937 China: Public and private capital inflows from the United 66 Kingdom and banking crises, 1875–1914 China: Central government debt issuance (domestic plus 66 external) and banking crises, 1981–2009 Colombia: Central government (domestic plus external) 67 debt, default, and banking crises, 1902–2009 Colombia banking survey: Domestic credit and banking 68 crises, 1970–2008 Costa Rica: Central government (domestic plus external) 69 debt default and banking crises, 1892– Cote D’Ivoire: External (public plus private) debt, default, 70 and banking crises, 1970–2009

Figure 2.17 Figure 2.18 Figure 2.19a Figure 2.19b Figure 2.20 Figure 2.21a Figure 2.21b Figure 2.22a Figure 2.22b Figure 2.23 Figure 2.24a Figure 2.24b Figure 2.25 Figure 2.26a Figure 2.26b Figure 2.27 Figure 2.28 Figure 2.29 Figure 2.30a Figure 2.30b Figure 2.30c

Denmark: Central government (domestic plus external) 71 debt, default, and banking crises, 1880–2009 Dominican Republic: Central government (domestic plus 72 external) debt, default, devaluation, and banking crises, 1914–2009 Ecuador: Central government (domestic plus external) 73 debt, default and banking crises, 1914–2009 Ecuador: External (public plus private) debt, default, 74 and banking crises, 1970–2009 Egypt: Public debt, default, and banking crises, 1862–2009 75 El Salvador: Central government (domestic plus external) 76 debt, default and banking crises, 1914–2009 El Salvador: External (public plus private) debt, default, 77 and banking crises, 1970–2009 Finland: Central government (domestic plus external) 78 debt and banking crises, 1914–2009 Finland banking survey: Domestic credit and banking 79 crises, 1970–2008 France: Central government (domestic plus external) 80 debt and banking crises, 1880–2009 Germany: Federal and total government (domestic plus 81 external) debt, default, hyperinflation, and banking crises, 1880–2009 Germany: Public and private capital inflows from the 82 United Kingdom and banking crises, 1870–1912 Ghana: Total public (domestic and external) debt, default, 83 and banking crises, 1970–2009 Greece: Central government (domestic plus external) 84 debt, default, hyperinflation, and banking crises, 1848–2009 Greece: Government domestic debt, default, and banking 85 crises, 1884–1939 Guatemala: Central government (domestic plus external) 86 debt, default, and devaluation, 1920–2009 Honduras: Central government (domestic plus external) 87 debt, default, and devaluation, 1914–2009 Hungary: Central government (domestic plus external) 88 debt, default, hyperinflation, and banking crises, 1880–2009 Iceland: Central government (domestic plus external) 89 debt and banking crises, 1908–2009 Iceland: External (public plus private) debt and banking 90 crises, 1922–2009 Iceland banking survey: Domestic credit and banking 90 crises, 1970–2008 ix

Figure 2.31 Figure 2.32a Figure 2.32b Figure 2.33a Figure 2.33b Figure 2.34 Figure 2.35a Figure 2.35b Figure 2.36 Figure 2.37a Figure 2.37b Figure 2.38a Figure 2.38b Figure 2.39 Figure 2.40a Figure 2.40b Figure 2.41 Figure 2.42 Figure 2.43 Figure 2.44a Figure 2.44b Figure 2.45 Figure 2.46 x

India: Public (domestic plus external) debt reschedulings, 91 near-default, and banking crises, 1835–2009 Indonesia: Central government (domestic plus external) 92 debt, default, and banking crises, 1911–2009 Indonesia banking survey: Domestic credit, default and 93 banking crises, 1970–2008 Ireland: Central government (domestic plus external) debt 94 and banking crises, 1929–2009 Ireland banking survey: Domestic credit and banking 95 crises, 1970–2010Q2 Italy: Central government (domestic plus external) debt, 96 default, and banking crises, 1861–2009 Japan: Central government (domestic plus external) debt, 97 default, and banking crises, 1885–2009 Japan banking survey: Domestic credit and banking 98 crises, 1970–2008 Kenya: External (public plus private) debt, default, and 99 banking crises, 1970–2009 Korea: External (public plus private) debt, near-default, 100 and banking crises, 1970–2009 Korea banking survey: Domestic credit and banking 101 crises, 1970–2008 Malaysia: External (public plus private) debt, near-default, 102 and banking crises, 1970–2009 Malaysia banking survey: Domestic credit, default and 103 banking crises, 1970–2008 Mauritius: External (public plus private) debt, default, 104 and banking crises, 1970–2009 Mexico: Public foreign bond issues, default, and banking 105 rises, 1824–1910 Mexico: Central government (domestic plus external) 106 debt, default, and banking crises, 1872–2009 Morocco: External (public plus private) debt, default, 107 and banking crises, 1970–2009 Myanmar: External (public plus private) debt, default, 108 and banking crises, 1970–2009 Netherlands: General government (domestic plus 109 external) and banking crises, 1812–2009 New Zealand: Central government (domestic plus 110 external) debt and banking crises, 1860–2009 New Zealand: Private capital inflows from the United 111 Kingdom and banking crises, 1865–1905 Nicaragua: Central government (domestic plus external) 112 debt and default, hyperinflation, and banking crises, 1914–2009 Nigeria: External (public plus private) debt, default, and 113 banking crises, 1970–2009

Figure 2.47a Figure 2.47b Figure 2.48 Figure 2.49 Figure 2.50a Figure 2.50b Figure 2.51a Figure 2.51b Figure 2.52a Figure 2.52b Figure 2.53 Figure 2.54 Figure 2.55a Figure 2.55b Figure 2.56 Figure 2.57a Figure 2.57b Figure 2.58a Figure 2.58b Figure 2.58c Figure 2.58d Figure 2.59

Norway: Central government (domestic plus external) 114 debt and banking crises, 1880–2009 Norway: Domestic Private credit, 1900–2004 115 Panama: Central government (domestic plus external) 116 debt and banking crises, 1914–2009 Paraguay: External (public plus private) debt, near- 117 default, and banking crises, 1970–2009 Peru: Central government (domestic plus external) debt, 118 default, and banking crises, 1917–2009 Peru: Total (public and private) capital inflows from 119 the United Kingdom and banking crises, 1865–1905 Philippines: External private and public (domestic plus 120 external) debt, near-default, and banking crises, 1948–2009 Philippines banking survey: Domestic credit, default and 121 banking crises, 1980–2008 Poland: Central government (domestic plus external) 122 debt, default, hyperinflation and banking crises, 1917–1947 Poland: Central government (domestic plus external) 123 debt, default, hyperinflation and banking crises, 1984–2009 Portugal: Central government (domestic plus external) 124 debt, default, and banking crises, 1851–2009 Romania: External (public plus private) debt, default, and 125 banking crises, 1970–2009 Russia: Public foreign bond issues and default, 126 1815–1945 Russia: External (public plus private) debt, default, 127 hyperinflation, and banking crises, 1985–2009 Singapore: Central government (domestic and external) 128 debt, default, and banking crises, 1969–2009 South Africa: Central government (domestic plus 129 external) debt, default, and banking crises, 1911–2009 South Africa: Private capital inflows from the United 130 Kingdom and banking crises, 1865–1895 Spain: Short-term loans to the Crown and defaults, 131 1601–1679 Spain: Central government (domestic plus external) 132 debt, default, and banking crises, 1850–2009 Spain: Total (public and private) capital inflows from the 133 United Kingdom and banking crises, 1865–1914 Spain banking survey: Domestic credit, default, and 133 banking crises, 1970–2008 Sri Lanka: Central government (domestic plus external) 134 debt, default, and banking crises, 1950–2009 xi

Figure 2.60a Figure 2.60b Figure 2.61 Figure 2.62a Figure 2.62b Figure 2.63 Figure 2.64a Figure 2.64b Figure 2.65a Figure 2.65b Figure 2.66a Figure 2.66b Figure 2.66c Figure 2.66d Figure 2.67a Figure 2.67b Figure 2.68 Figure 2.69 Figure 2.70

Boxes

Box 1.1 Box 1.2

xii

Sweden: Central government (domestic plus external) 135 debt, default, and banking crises, 1719–2009 Sweden banking survey: Domestic credit, default and 136 banking crises, 1970–2008 Switzerland: Central government (domestic plus external) 137 debt and banking crises, 1880–2009 Thailand: Public (domestic and external) and external 138 (public and private) debts, near-default, and banking crises, 1913–2009 Thailand banking survey: Domestic credit and banking 139 crises, 1970–2008 Tunisia: External (public plus private) debt, default, and 140 banking crises, 1970–2009 Turkey: External public debt, default, and banking 141 crises 1854–2009 Turkey: External public and private debts, default, near- 142 default, and banking crises, 1970–2009 United Kingdom: Central government debt, 143 restructurings, and banking crises, 1692–2009 United Kingdom banking survey: Domestic credit and 144 banking crises, 1970–2008 United States: Central government debt, default, 145 and banking crises, 1790–2009 United States: Private capital inflows from the United 146 Kingdom and banking crises, 1865–1914 United States: Private debt outstanding, 1916–2009 146 United States banking survey: Domestic credit and 147 banking crises, 1970–2008 Uruguay: Public (domestic plus external) debt, default, 148 restructuring, and banking crises, 1871–2009 Uruguay: Total (private and public) capital inflows from 149 the United Kingdom and default, and banking crises, 1865–1914 Venezuela: Central government (domestic plus external) 150 debt, default, and banking crises, 1921–2009 Zambia: External (public plus private) debt, default, and 151 banking crises, 1970–2009 Zimbabwe: External (public plus private) debt, default, 152 restructuring, hyperinflation, and banking crises, 1970–2009 Financial repression defined Contagion concepts

4 19

Preface

This Policy Analysis addresses a fundamentally new feature of the contemporary world economy: the simultaneous peacetime buildup of very large public debt positions in virtually all of the advanced high-income countries. The recent financial crisis sharply accelerated this fiscal deterioration but it was already well underway in some countries, including the United States, where demographic prospects had posed extremely worrisome trajectories for a number of years. This study has three basic purposes. First, it quantifies the recent surge of debt positions in the advanced countries over the past decade and places it in a historical context. Second, it notes the association between high public debt with a series of key economic variables, including growth rates and the risks of debt restructurings and defaults. Third, it stresses the possibility of a return to the financial repression practiced by many governments in earlier periods to cope with previous debt buildups. The paper concludes that debt profiles in most advanced and some emerging economies have grown to dangerous and unsustainable levels and that major changes are therefore required in projected spending and revenue levels. Critical questions raised by this prognosis include the likely nature and timing of new crises, and hence the policy strategies that countries should undertake to prevent such outcomes without jeopardizing recovery from the Great Recession. The study is authored by Carmen Reinhart and Kenneth Rogoff, drawing on their definitive study of the history of debt in This Time is Different: Eight Centuries of Financial Folly. Dr. Reinhart is the new Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics, having joined our staff in November 2010. She is the recipient of the 2010 TIAA-CREF xiii

Paul A. Samuelson Award. Dr. Rogoff is the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University, and was Chief Economist and Director of Research at the International Monetary Fund during 2001–03. An earlier version of the study was released as Working Paper 16827 of the National Bureau of Economic Research, of which Dr. Reinhart and Dr. Rogoff are associates. The Institute undertook this project at the request of the Peter G. Peterson Foundation, which is a completely separate entity. The Foundation focuses much of its attention on the fiscal prospects and problems of the United States, and asked the Institute to imbed those national issues in the global context to assess how that broader perspective might affect the outlook and especially the need for early policy action by the United States. This project follows on two earlier studies that we conducted at the request of Foundation: The Global Outlook for Government Debt over the Next 25 Years, by Joseph E. Gagnon and Marc Hinterschweiger, and The Long-Term International Economic Position of the United States, which I edited and we released as Special Report 20 in May 2009. The Peter G. Peterson Institute for International Economics is a private, nonprofit institution for the study and discussion of international economic policy. Its purpose is to analyze important issues in that area and to develop and communicate practical new approaches for dealing with them. The Institute is completely nonpartisan. The Institute is funded by a highly diversified group of philanthropic foundations, private corporations, and interested individuals. About 35 percent of the Institute’s resources in our latest fiscal year was provided by contributors outside the United States. This study, as noted, was supported by the Peter G. Peterson Foundation. The Institute’s Board of Directors bears overall responsibilities for the Institute and gives general guidance and approval to its research program, including the identification of topics that are likely to become important over the medium run (one to three years) and that should be addressed by the Institute. The director, working closely with the staff and outside Advisory Committee, is responsible for the development of particular projects and makes the final decision to publish an individual study. The Institute hopes that its studies and other activities will contribute to building a stronger foundation for international economic policy around the world. We invite readers of these publications to let us know how they think we can best accomplish this objective.

xiv

C. Fred Bergsten Director August 2011

PETER G. PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS 1750 Massachusetts Avenue, NW, Washington, DC 20036-1903 (202) 328-9000 Fax: (202) 659-3225 C. Fred Bergsten, Director BOARD OF DIRECTORS * Peter G. Peterson, Chairman * George David, Vice Chairman * James W. Owens, Chairman, Executive Committee Leszek Balcerowicz Ronnie C. Chan Chen Yuan * Andreas C. Dracopoulos * Jessica Einhorn Mohamed A. El-Erian Stanley Fischer Jacob A. Frenkel Maurice R. Greenberg Herbjorn Hansson Tony Hayward * Carla A. Hills Karen Katen W. M. Keck II Michael Klein * Caio Koch-Weser Lee Kuan Yew * Reynold Levy Andrew N. Liveris Sergio Marchionne Donald F. McHenry Indra K. Nooyi Paul O’Neill David J. O’Reilly Hutham Olayan Samuel J. Palmisano Frank H. Pearl Michael A. Peterson Victor Pinchuk * Joseph E. Robert, Jr. Lynn Forester de Rothschild * Richard E. Salomon Sheikh Hamad Saud Al-Sayari Edward W. Scott, Jr. Frederick W. Smith Lawrence H. Summers Jean-Claude Trichet Laura D’Andrea Tyson Paul A. Volcker Peter Voser Jacob Wallenberg Marina v.N. Whitman Ronald A. Williams Ernesto Zedillo Ex officio * C. Fred Bergsten Nancy Birdsall Richard N. Cooper Barry Eichengreen Honorary Directors Alan Greenspan Frank E. Loy David Rockefeller George P. Shultz

ADVISORY COMMITTEE Barry Eichengreen, Chairman Richard Baldwin, Vice Chairman Kristin Forbes, Vice Chairwoman Isher Judge Ahluwalia Robert E. Baldwin Steve Beckman Olivier Blanchard Barry P. Bosworth Menzie Chinn Susan M. Collins Wendy Dobson Jeffrey A. Frankel Daniel Gros Sergei Guriev Stephan Haggard Gordon H. Hanson Takatoshi Ito John Jackson Peter B. Kenen Anne O. Krueger Paul R. Krugman Justin Yifu Lin Jessica T. Mathews Rachel McCulloch Thierry de Montbrial Sylvia Ostry Jean Pisani-Ferry Eswar S. Prasad Raghuram Rajan Changyong Rhee Kenneth S. Rogoff Andrew K. Rose Fabrizio Saccomanni Jeffrey D. Sachs Nicholas H. Stern Joseph E. Stiglitz William White Alan Wm. Wolff Daniel Yergin Richard N. Cooper, Chairman Emeritus

* Member of the Executive Committee

Acknowledgments

The authors are grateful to C. Fred Bergsten, Joseph Gagnon, Peter G. Peterson, Vincent R. Reinhart, and participants at a meeting at the Peterson Foundation on September 27, 2010 for helpful comments, suggestions, and discussions, to National Science Foundation Grant No. 0849224 for financial support, and to Maura Francese, Elín Guðjónsdóttir, Fregert Gustaffson, Sophia Lazaretou, Ashok Mody, Diego Saravia, and Jan-Luiten Van Zanden for providing invaluable references on individual countries and, in some cases, sharing their historical data as well.

xvii

Executive Summary

This Policy Analysis presents evidence that public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing the heights reached during the World War I and the Great Depression. At the same time, private debt levels, particularly those of financial institutions and households, are in uncharted territory and are (in varying degrees) a contingent liability of the public sector in many countries. Historically, high leverage episodes have been associated with slower economic growth and a higher incidence of default or, more generally, restructuring of public and private debts. A more subtle form of debt restructuring in the guise of “financial repression” (which had its heyday during the tightly regulated Bretton Woods system) also importantly facilitated sharper and more rapid debt reduction than would have otherwise been the case from the late 1940s to the 1970s. It is conjectured here that the pressing needs of governments to reduce debt rollover risks and curb rising interest expenditures in light of the substantial debt overhang (combined with the widespread “official aversion” to explicit restructuring) are leading to a revival of financial repression— including more directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, and tighter regulation on cross-border capital movements.

xix

A Decade of Debt

1

CARMEN M. REINHART and KENNETH S. ROGOFF

I. Introduction Public debts in the advanced economies have surged in recent years to levels that have not been recorded since the end of World War II. Through 2010, the average public debt/GDP ratio for all the advanced economies has surpassed the pre-World War II peaks reached during the World War I and subsequently during the Great Depression.1 Private debt levels, particularly those of financial institutions and households, are similarly in uncharted territory and represent (in varying degrees) potential contingent liability of the public sector in many countries, including the United States. As documented in Reinhart, Rogoff, and Savastano (2003) for emergingmarket countries, large public debt overhangs do not unwind quickly and seldom painlessly. In particular, debt-to-GDP ratios are seldom reduced entirely through consistent robust economic growth. More commonly, reducing debt levels significantly has relied on fiscal austerity, debt restructuring (sometimes outright default), or a combination of these.

1. Unless otherwise noted, public debt in this Policy Analysis refers to gross central government debt. As such, it does not include other levels of government indebtedness (for example, state and local debt in the United States), nor does it encompass public enterprise debt, or debt that carries an explicit (let alone implicit) government guarantee. Contingent liabilities of the government associated with Social Security benefits are not incorporated in our long (a century or, for some countries, more) of government debt data and its analysis. Domestic public debt is government debt issued under domestic legal jurisdiction. Public debt does not include obligations carrying a government guarantee. Total gross external debt includes the external debts of all branches of government as well as private debt issued by domestic private entities under a foreign jurisdiction.

1

In a complementary analysis of private debt deleveraging episodes following systemic financial crises, Reinhart and Reinhart (2011) show that the debt reduction process goes on for an average of about seven years. Also, because of declining output and accumulating arrears on existing debts, private debt ratios usually continue to climb even until two or three years after the height of the financial crisis—delaying the effective reduction of debt ratios.2 The combination of high and climbing public debts (a rising share of which is held by major central banks) and the protracted process of private deleveraging makes it likely that the ten years from 2008 to 2017 will be aptly described as a decade of debt. As such, the issues we raise in this Policy Analysis will weigh heavily on the public policy agenda of numerous advanced economies and global financial markets for some time to come. The following summarizes key aspects of our recent body of work on public debt and financial crises. Of course, if global real interest rates remain very low for an extended period, carrying costs of debt will be correspondingly low, and exceptionally high leverage ratios can persist longer than usual. However, as we emphasize in Reinhart and Rogoff (2009), interest rates can turn far faster than debt levels, so if deleveraging does not occur, debt will be a continuing vulnerability. The analysis that follows draws on and expands various strands of our earlier work.3 Historically, high leverage episodes have been associated with slower economic growth. This observation applies to the high-debt episodes that follow on the heels of wars as well as to their peacetime counterparts. It also characterizes episodes where high debt levels were not associated with markedly higher interest rates.4 Surges in private debt lead to private defaults (which most often become manifest in the form of banking crises).5 Banking crises are associated with mounting public debt, which ultimately lead to a higher incidence of sovereign default or, more generally, restructuring of public and private debts.

2. Private deleveraging, as measured by new borrowing (see Fostel and Geanokoplos 2008 and Geanokoplos 2009) usually begins to slow down markedly or decline during the crisis and, in some cases, just before the onset of crisis. 3. Specifically, this Policy Analysis draws on Reinhart and Rogoff (2008, 2009, 2010a, 2010b, 2011a, 2011b). Although much of this Policy Analysis is devoted to synthesizing earlier work, there is important new material here, including the discussion of how World War I and Great Depression debt were largely resolved through outright default and restructuring, whereas World War II debts were often resolved through financial repression. We argue that financial repression is likely to play a big role in the exit strategy from the current buildup. We also highlight here the extraordinary external debt levels of Ireland and Iceland compared with all historical norms in our database. 4. See Gagnon and Hinterschweiger (2011) for an analysis of the links between debt and interest rates. 5. See Kaminsky and Reinhart (1999).

2â•…

Specifically, banking crises and surges in public debt help to “predict” sovereign debt crises. Of course, this historical pattern had been dominant prior to the era of mega bailouts ushered in with the 1992 Japanese domestic banking crisis, followed by (on an international scale) the 1994–95 Mexican peso crises, reinforced during the Asian crisis with the Korean package, and reaching everescalating historic highs on both domestic and international dimensions at the time of this writing. The “bailout approach” in the current episode began in the summer of 2007 in the United States in response to the subprime mortgage crisis and morphed into the most serious advanced-economy debt crisis since the 1930s. A more subtle form of debt restructuring takes the form of “financial repression” (which had its heyday during the tightly regulated Bretton Woods system). Limiting investment choices of the private sector importantly facilitated sharper and more rapid debt reduction from the late 1940s to the 1970s than would have otherwise been the case (Reinhart and Sbrancia 2011). We conjecture here that the pressing needs of governments to reduce debt rollover risks and curb rising interest expenditures in light of the substantial debt overhang, combined with an aversion to more explicit restructuring, may lead to a revival of financial repression. This includes more directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, and tighter regulation on cross-border capital movements.6 A less generous depiction of financial repression (see definition in box 1.1) would include the savaging of pension funds. Section II places the recent surge in government debt in the advanced economies in historical perspective, distinguishing the timing and magnitudes of earlier high-debt episodes. Section III summarizes our findings on the temporal causal links between financial crises, rapid surges in public debt, and subsequent sovereign restructuring or outright default. In section IV we document that high debt is associated with slower growth—a relationship that is robust across advanced and emerging markets since World War II, as well an earlier era. The last large wave of sovereign defaults or restructurings in the advanced economies during the early 1930s (outright defaults were confined to the handful of countries on the losing side of World War II) is discussed in section V, which also describes the heavy-handed financial regulation (often referred to as financial repression) that helped rapidly reduce the World War II debt overhang. The concluding section suggests many of the elements of financial repression have already begun to resurface (a trend that is likely to gather momentum in coming years), as governments simultaneously grapple with the difficult choices associated with substantial debt reduction.

6. There is a literature on financial repression in emerging-market economies (see Easterly 1989 and Giovannini and Di Melo 1993, for example). However, the Bretton Woods system embraced in 1946 established a system of tightly regulated financial markets based on the three pillars of (1) directed credit; (2) interest rate ceilings; and (3) foreign exchange controls (see box 1.1).

A DECADE OF DEBTâ•… 3

Box 1.1 Financial repression defined The term financial repression was introduced in the literature by the works of Edward Shaw (1973) and Ronald McKinnon (1973). Subsequently, the term became a way of describing emerging-market financial systems prior to the widespread financial liberalization that began in the 1980 (see Agenor and Montiel 2008 for an excellent discussion of the role of inflation and Giovannini and de Melo 1993 and Easterly 1989 for country-specific estimates). However, as we document in this paper, financial repression was also the norm for advanced economies during the post–World War II period and in varying degrees up through the 1980s. We describe here some of its main features. Pillars of financial repression 1. Explicit or indirect caps or ceilings on interest rates, particularly (but not exclusively) those on government debts. These interest rate ceilings could be effected through various means, including (1) explicit government regulation (for instance, Regulation Q in the United States prohibited banks from paying interest on demand deposits and capped interest rates on saving deposits); (2) ceilings on banks’ lending rates, which were a direct subsidy to the government in cases where it borrowed directly from the banks (via loans rather than securitized debt); and (3) interest rate cap in the context of fixed coupon rate nonmarketable debt or (4) maintained through central bank interest rate targets (often at the directive of the Treasury or Ministry of Finance when central bank independence was limited or nonexistent). Allan Meltzer’s (2003) monumental history of the Federal Reserve (volume I) documents the US experience in this regard; Alex Cukierman’s (1992) classic on central bank independence provides a broader international context. (continued on next page)

II. Surges in Public Debt Throughout the ages and across continents, war has been a recurrent causal force behind rapid deteriorations in government finances and surges in public indebtedness. This pattern shows through in world debt aggregates and individual country histories. Thus, it is not surprising to see that, particularly for the advanced economies, two spikes in debt aggregates correspond to the two world wars (figure 1.1). The smaller set of independent (largely European) economies that populated the globe in the early 1800s experienced a similar sharp run-up in debt during the Napoleonic Wars.

4â•…

GRAPHICS

7

Box 1.1 Financial repression defined (continued) 2. Creation and maintenance of a captive domestic audience that facilitated directed credit to the government. This was achieved through multiple layers of regulations from very blunt to more subtle measures. (1) Capital account restrictions and exchange controls orchestrated a “forced home bias” in the portfolio of financial institutions and individuals under the Bretton Woods arrangements. (2) High reserve requirements (usually nonremunerated) as a tax levy on banks (see Brock 1989 for an insightful international comparison). Among more subtle measures, (3) “prudential” regulatory measures requiring that institutions (almost exclusively domestic ones) hold government debts in their portfolios (pension funds have historically been a primary target), (4) transaction taxes on equities (see Campbell and Froot 1994) also act to direct investors toward government (and other) types of debt instruments, and (5) prohibitions on gold transactions. 3. Other common measures associated with financial repression aside from the ones discussed above are (1) direct ownership (e.g., in China or India) of banks or extensive management of banks and other financial institutions (e.g., in Japan) and (2) restricting entry into the financial industry and directing credit to certain industries (see Beim and Calomiris 2000). Source: Reinhart and Sbrancia (2011) and sources cited therein.

During peacetime, a leading factor behind rapid surges in public debt has been severe or systemic financial crises. With the growing tendency toward increasing government involvement in rescue operations, the link between public debt and financial crashes has become more pronounced in the past two decades or so. More general and chronic fiscal problems (because governments systematically overspend, do not have the political will or ability to tax effectively, or a combination of the two) tend to produce more gradual debt buildups. As figure 1.1 illustrates, public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing previous peaks reached during World War I and the Great Depression. At the same time, private debt levels, particularly those of households, are simply in uncharted territory and are (in varying degrees) a contingent liability of the public sector in many countries, including the United States. As we emphasize in Reinhart and Rogoff (2009, 2011b) and discuss further below,GRAPHICS most govern21 ments find it difficult to avoid backstopping significant amounts of private credit during a financial crisis.

A DECADE OF DEBTâ•… 5

Figure 1.1

Gross central government debt as a percent of GDP: Advanced and emerging-market economies, 1860–2010

percent 120

100

80

Great Depression World War II

Advanced economies

World War I

60

Emerging markets

40 20

0 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Sources: Reinhart and Rogoff (2011a) and sources cited therein.

Financial Crises and Debt Figure 1.2 takes advantage of newly unearthed historical data on domestic debt to show the rise in real government debt in the three years following severe banking crises of the 20th century.7 A buildup in government debt has been a defining characteristic of the aftermath of banking crises for over a century, with government finances deteriorating to produce an average debt rise of 86 percent. This comparative exercise focuses on the percentage increase in debt, rather than the debt-to-GDP ratio, because steep output drops sometimes complicate the interpretation of debt/GDP ratios. As we note in Reinhart and Rogoff (2008), the characteristic huge buildups in government debt are driven mainly by sharp falloffs in tax revenue, owing to the severe and protracted nature of postcrisis recessions. In some famous cases (notably Japan in the 1990s), this deterioration in fiscal balances also owes to surges in government spending to fight the recession. The much ballyhooed bank bailout costs are, in several cases, only a relatively minor contributor to post–financial crisis debt burdens.

7. This analysis was first introduced in Reinhart and Rogoff (2008).

6â•…

GRAPHICS

9

10

Figure 1.2

[GLOBAL DEBT]

Cumulative increase in public debt in the three years following systemic banking crisis: Selected post–World War II episodes

Malaysia, 1997 Mexico, 1994 Japan, 1992 Norway, 1987 Philippines Korea, 1997 Sweden, 1991 Thailand, 1997 Historical

186.3 (an 86 percent increase)

Spain, 1977 Indonesia, 1997 Chile, 1980 Finland, 1991

A DECADE OF DEBTâ•… 7

Colombia, 1998 100

120

140

160

180

200

220

240

260

280

300

index = 100 in year of crisis Notes: Each banking crisis episode is identified by country and the beginning year of the crisis. Only major (systemic) banking crisis episodes are included, subject to data limitations. The historical average reported does not include ongoing crisis episodes, which are omitted altogether, as these crises begin in 2007 or later, and debt stock comparison shown is three years after the beginning of the banking crisis. Source: Reinhart and Rogoff (2008 and 2009) and sources cited therein.

Figure 1.3

Cumulative increase in real public debt since 2007, selected countries 2007 = 100 100

150

200

250

300

350

debt/GDP, 2010 (percent)

Iceland

116

Ireland

94

Spain

64

United Kingdom

76

United States Greece

93

234 (increase of 134 percent)

144

Portugal

86

Crisis country average

88

Australia

22

Norway

27

Chile

6

Mexico

28

Thailand

46

Brazil

67

Austria

70

Germany

79

Belgium

98

Japan

189

India Average for others

37 136 (increase of 36 percent)

65

Notes: Unless otherwise noted these figures are for central government debt deflated by consumer prices. Sources: Prices and nominal GDP from International Monetary Fund, World Economic Outlook. For a complete listing of sources for government debt, see Reinhart and Rogoff (2009) and chapter 2.

More broadly, an examination of the aftermath of severe financial crises shows deep and lasting effects on asset prices, output, and employment. Unemployment rises and housing price declines extend out for five and six years, respectively. Even recessions sparked by financial crises do eventually end, albeit almost invariably accompanied by massive increases in government debt. 8â•…

GRAPHICS

11

The 2007–10 Global Buildup in Public Debt Figure 1.3 illustrates the increase in (inflation adjusted) public debt since 2007. For the countries with systemic financial crises and/or sovereign debt problems (Greece, Iceland, Ireland, Portugal, Spain, the United Kingdom, and the United States), average debt levels are up by about 134 percent, surpassing by a sizable margin the three-year 86 percent benchmark that we find (Reinhart and Rogoff 2009) for earlier deep postwar financial crises. The larger debt buildups in Iceland and Ireland are importantly associated not only with the sheer magnitude of the recessions/depressions in those countries but also with the scale of the bank debt buildup prior to the crisis—which is, as far as we are aware—without parallel in the long history of financial crises. Nor will 2010 (the third year of crisis for Iceland, Ireland, the United Kingdom, and the United States and the second year for the others) be the last year in which rising debt will be recorded. At present, forecasts for the United States show rising debt levels in the foreseeable future; for several others, austerity programs notwithstanding, debts are likely to continue to mount as economic conditions remain subpar and debt servicing costs climb. Even in countries that did not experience a major financial crisis, debt rose by an average of about 36 percent in real terms between 2007 and 2010.8 Many economies adopted stimulus packages to deal with the global recession in 2008–09 and were hit by marked declines in government revenues. Moreover, some of the larger increases in debt loads of noncrisis countries (such as Norway, Australia, and Chile) relate to the cyclical downdraft in world commodity prices that accompanied the global recession.

III. The Financial Crash–Sovereign Debt Crisis Sequence In this section, we summarize the main findings in Reinhart and Rogoff (2011b). Our approach in that paper was to illustrate each main result with both a “big picture” based on cross-country aggregation and a “representative country case study (or studies)” from country histories. Each of the main points highlighted in the figures is complemented by the pertinent debt/ GDP-crisis indicator regressions reported at the bottom of each figure. We begin by discussing sovereign default on external debt (that is, when a government defaults on its own external or private-sector debts that were publicly guaranteed).

8. Our focus on gross central government debt owes to the fact that time series of broader measures of government debt are not available for many countries. Of course, the true runup in debt is significantly larger than stated here, at least on a present value actuarial basis, due to the extensive government guarantees that have been conferred on the financial sector in the crisis countries and elsewhere, where for example deposit guarantees were raised in 2008.

A DECADE OF DEBTâ•… 9

Figure 1.4

Sovereign default on external debt, total (domestic plus external) public debt, and inflation crises: World aggregates, 1826–2010

12 [GLOBAL DEBT] 10â•…

debt as a percent of GDP

percent of countries 50 45

90

Total public debt/GDP, world average (in percent, solid line, right axis)

40

80 Percent of countries with annual inflation over 20 percent (dark bars, left axis)

35

70

30 60

25 20

50

15

40

10 5

Percent of countries in default or restructuring (light bars, left axis)

0 1826 1836 1846 1856 1866 1876 1886 1996 1906 1916 1926 1936 1946 1956 1966 1976 1986 1996 2006

30

20

Notes: Unless otherwise noted these figures are for central government debt deflated by consumer prices. Sources: Prices and nominal GDP from International Monetary Fund, World Economic Outlook. For a complete listing of sources for government debt, see Reinhart and Rogoff (2009) and chapter 2.

Table 1.1

Public debt and sovereign default and restructuring: All countries, 1824–2009

Dependent variable

World: Share of countries in default or restructuring

Sample

1824–2009

Independent variables World: Public debt/GDP (t-1) p-value Number of observations R2

OLS (robust errors)

Logit (robust errors)

0.346

0.008

0

0

184

184

0.224

0.246

OLS = ordinary least squares Logit = logistic regression Notes: The debt aggregate for the world is a simple arithmetic average of individual countries’ debt/ GDP ratios. For a few countries the time series on debt and exports are much longer dating back to the first half of the 19th century than for nominal GDP. In these cases (Brazil, Canada, Egypt, India, Nicaragua, Thailand, Turkey, and Uruguay) the debt/GDP series was spliced (with appropriate scaling) with the to the available debt/GDP data. The split between advanced and emerging economies is made along the present-day IMF classification. Sources: Reinhart and Rogoff (2011b), sources cited therein and authors’ calculations.

Public Debt Surges and Sovereign Default and Restructuring Public debt follows a lengthy and repeated boom-bust cycle; the bust phase involves a markedly higher incidence of sovereign debt crises. Public-sector borrowing surges as the crisis nears. In the aggregate, debts continue to rise after default, as arrears accumulate and GDP contracts markedly.9 Figure 1.4 plots the incidence of external default (lighter bars) from 1826, when the newly independent Latin American economies first entered the global capital market, through 2010 against an unweighted average debt/GDP ratio for all the countries for which such data are available. Upturns in the debt ratio usually precede the rise in default rates, as the regressions (shown in table 1.1) for the world aggregates confirm. Periods of higher indebtedness are also associated with a higher incidence of inflation crises (a more indirect form of default, highlighted as darker bars where the incidence of inflation exceeds that of default). Default through inflation has been more prevalent since World War I, as fiat money became the norm and links to gold severed. Serial default is a widespread phenomenon across emerging markets and several advanced economies. The most compelling evidence on serial default comes from the individual country histories, shown here for Greece in figure 1.5. The 70 country histories presented in chapter 2 provide broad-based evidence that serial default cut across regions and across time.

9. See Reinhart and Rogoff (2009, 2011a) for evidence on output behavior before, during, and after debt crises.

GRAPHICS A DECADE OF DEBTâ•… 11

1

Figure 1.5    Greece: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1848–2009 debt as a percent of GDP

450

Household debt as a percent of GDP

400

1995 2000 2005 2008

350 300 250

6 12.9 35.9 49.7

200 150 100 50 0 1848 1858 1868 1878 1888 1898 1908 1918 1928 1938 1948 1958 1968 1978 1988 1998 2008 Banking crisis

External defaults

Hyperinflation, 1941–44

Near-default, 2010

Source: Chapter 2.

The “hallmark” surge in debt on the eve of a debt crisis, banking crisis, or both is quite evident in Greece’s last two defaults in 1894 and in 1932—the latter default spell lasted about 33 years from beginning to its eventual resoluTable A26 Greece: Default, restructuring, banking crises, growth collapses, tion in 1964. hyperinflation, and IMF programs, 1829–2009 5 worst Share of output Domestic crisis Hyperyears in years in collapses, External Duration dates inflation and external inflation year The default/ drama that has mostdefault/ notably engulfed Iceland Ireland is novel only restructuring (in years) restructuring (first year) dates default crisis (decline)1 Banking Share of Hidden Debts—Private Debts that Become Public

in the orders of magnitude of the debts, not in the causes and patterns of the

1826–42 10 17 1932–51 1931 1941–44 48.1 12.7 1847 (14.0) crisis. Writing about Chile’s crises in1991 the early 1980s, Carlos Diaz-Alejandro 1843–59 17 1852 (14.7) (1985) asks us to 19 consider a country that had liberalized its domestic financial 1860–78 1856 (11.7) sector and was fully 1894–97 4 integrated into world capital markets. 1891 (11.5) 1932–64 33 1919 (17.7) recorded public sector deficit was nonexistent, minuscule, or moderate; NumberThe of episodes: 5 the declining importance of 1 ostensible2 public debt 1 in the national balance

sheet was celebrated by some observers.

Memorandum item on IMF programs, 1952–2007 Dates of programs None

Total 0

1. Excludes Wars I and II. times the size of GDP (as the cases of Iceland and Ireland) are histori10. GrossWorld external debts ten callyKostelenos off the charts for(2007). both advanced and emerging-market economies. In effect, Reinhart, Rogoff, Source: et. al. and Savastano (2003) calculate that more than half of all emerging-market defaults or restructuring episodes since World War II occurred at debt levels of 60 percent or less (which would satisfy the Maastricht criteria).

12â•… 40

The private sector was a different matter. Their spending persistently exceeded their income, giving rise to large current account deficits. The current account deficit was financed by large and persistent capital inflows, which is a different way of saying that the domestic largesse was supported by borrowing heavily from the rest of the world. This abundance of foreign capital made it easy for domestic banks to lend liberally to businesses and households. During the credit boom, real estate and equity prices soared—so did debts. Growth seemed inevitable. However, as Diaz-Alejandro explains, the pity of the boom is that little effort was spent on investigating the credentials of new entrants to the ever-growing pool of lenders and borrowers…practically no inspection or supervision of bank portfolios existed…. One may conjecture, however, that most depositors felt fully insured and foreign lenders felt that their loans to the private sector were guaranteed by the State.

The two panels of figure 1.6, which plot the public debt/GDP ratios (top panel) and total gross external (public and private) debt (bottom panel) for Iceland and Ireland, faithfully mimic the pattern described by Diaz-Alejandro of “apparent” sound fiscal finances at the outset of the financial crisis.11 The most onerous sign of future sovereign debt difficulties is shown in the bottom panel of figure 1.6, which highlights the scale of the buildup in mostly private external debts that carried implicit (or explicit) government guarantees. After more than three years since the onset of the crisis, banking sectors remain riddled with high debts (of which a sizable share are nonperforming) and low levels of capitalization, while the household sector has significant exposures to a depressed real estate market. Under such conditions, the migration of private debts to the public sector and central bank balance sheets is likely to continue, especially in the prevalent environment of indiscriminate, massive bailouts.

Banking Crises as Predictors of Sovereign Debt Problems Banking crises most often either precede or coincide with sovereign debt crises. The reasons for this temporal sequence may be the contingent liability story emphasized by Diaz-Alejandro (1985) and formalized in Velasco (1987), in which the government takes on massive debts from the private banks, thus undermining its own solvency.12 The currency crashes that are an integral part of the “twin crisis” phenomenon documented by Kaminsky and Reinhart (1999) would also be consistent with this temporal pattern. If, as they suggest, banking crises precede currency crashes, the collapsing value of the domestic 11. We would note that Iceland and Ireland (and also Spain), so often in the news for their present debt difficulties, were exemplary cases of successful public debt reduction up until the eve of the current crisis. 12. See Arellano and Kocherlakota (2008) for a framework that is consistent with these dynamics.

A DECADE OF DEBTâ•… 13

14â•… 14

Figure 1.6

Iceland and Ireland: Public debt/GDP and external debt

[GLOBAL DEBT]

a. General government (domestic plus external) debt, 1925–2010 debt as a percent of GDP 140 120 Iceland peak of crisis, 2007

100 80

Ireland

60 40 20 0 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

2005 2010

Figure 1.6

Iceland and Ireland (continued) b. External (public plus private) debt, 1970–2010

debt as a percent of GDP 1,200

1,000

800 Ireland 600

400

GRAPHICS A DECADE OF DEBTâ•… 1515

200

Iceland

0 1970 Source: Chapter 2.

1975

1980

1985

1995

1990

2000

2005

2010

16â•…

16

Figure 1.7

[GLOBAL DEBT]

Sovereign default on external debt, total (domestic plus external) public debt, and systemic banking crises: Advanced economies, 1880–2010 debt as a percent of GDP

percent of countries 25

90 Years during which 25 percent or more of advanced economies entered the first year of a banking crisis (black bars), 1893, 1907, 1914, 1931, 2008

20

80

70 15 60

50

10

40 5

0 1880

Advanced economies: average public debt/GDP (in percent, line, right axis)

Percent of advanced economies in default or restructuring (shaded, left axis) 1890

1900

1910

Source: Reinhart and Rogoff (2011).

1920

1930

1940

1950

1960

30

20 1970

1980

1990

2000

2010

Table 1.2

Public debt and sovereign default and restructuring: Advanced economies, 1880–2009

Dependent variable

Advanced economies: Share of countries in default or restructuring

Sample

1880–2009

Independent variables

OLS (robust errors)

Logit (robust errors)

0.209

0.002

0

0

Advanced economies Public debt/GDP (t-1) p-value Number of observations R2 Dependent variable

130

130

0.176

0.167

Advanced economies: Share of countries in systemic banking crises

Sample Independent variables

1880–2009 OLS (robust errors)

Logit (robust errors)

Public debt/GDP (t-1)

0.057

0.002

p-value

0.002

0.006

130

130

0.047

0.05

Advanced economies

Number of observations R

2

OLS = ordinary least squares Logit = logistic regression Notes: The debt aggregates for the advanced economies and the world are simple arithmetic averages (not weighted by a country’s share in world GDP) of individual countries’ debt/GDP ratios. For a few countries the time series on debt and exports are much longer dating back to the first half of the 19th century than for nominal GDP. In these cases (Brazil, Canada, Egypt, India, Nicaragua, Thailand, Turkey, and Uruguay) the debt/GDP series was spliced (with appropriate scaling) with the available debt/GDP data. The split between advanced and emerging economies is made along the present-day IMF classification, even though several countries, such as New Zealand, were “emerging markets” during most of the pre-World War I period. Sources: Chapter 2; Reinhart and Rogoff (2011b), sources cited therein; and authors’ calculations.

currency that comes after the banking crisis begins may undermine the solvency of both private and sovereign borrowers who are unfortunate enough to have important amounts of foreign-currency debts. As figure 1.7 and table 1.2 highlight, this is not exclusively an “emerging-market issue,” as a higher incidence of sovereign default has followed the major financial crises. Even absent large-scale bailouts (and without counting postcrisis new government guarantees), we show that largely owing to collapsing revenues, government debts typically rise about 86 percent in the three years following a systemic financial crisis, setting the stage for rating downgrades and, in the worst scenario, default.

2

[GLOBAL DEBT]

A DECADE OF DEBTâ•… 17

A causal chain from sovereign debt crisis to banking crisis, perhaps obscured in these simple graphs, cannot be dismissed lightly. Financial repression and international capital controls may give the government scope to coerce otherwise healthy banks to buy government debt in significant quantities. A government default, in those circumstances, would directly impact the banks’ balance sheets. The two crises may be more or less simultaneous. But even if banks are not overly exposed to government paper, the “sovereign ceiling” in which corporate borrowers are rated no higher than their national governments may make banks’ offshore borrowing very costly or altogether impossible. The result would be a sudden stop that could give rise to bank insolvencies either immediately or subsequently.

Common Fundamentals, Contagion, or Both? In this subsection, we emphasize the fundamental distinction between international transmission that occurs due to common shocks (e.g., the collapse of the technology boom in 2001 or the collapse of housing prices in the crisis of the late 2000s) to transmission that occurs primarily due to mechanisms that are really the result of cross-border contagion emanating from the epicenter of the crisis. We offer a rationale for understanding which factors make it more likely that a primarily domestic crisis fuels fast and furious contagion (see box 1.2). We use these concepts to discuss the basis for contagion scenarios in Europe and elsewhere. The bunching of banking crises and sovereign debt difficulties across countries is so striking in the late-2000s crisis, where both common shocks and cross-country linkages are evident. As we discussed in Reinhart and Rogoff (2009), the conjuncture of elements related to the current crisis is illustrative of the two channels of contagion: cross-linkages and common shocks. Without doubt, the US financial crisis of 2007 spilled over into other markets through direct linkages. For example, German and Japanese financial institutions (and others ranging as far as Kazakhstan) sought more attractive returns in the US subprime market, perhaps owing to the fact that profit opportunities in domestic real estate were limited at best and dismal at worst. Indeed, after the fact, it became evident that many financial institutions outside the United States had nontrivial exposure to the US subprime market.13 This is a classic channel of transmission or contagion through which a crisis in one country spreads across international borders. In the present context, however, contagion or spillovers are only part of the story. The global nature of the crisisalso owes significantly to the fact that many of the features that characterized the run-up to the subprime crisis in the United States were present in many other advanced economies as well. Two common elements stand out. First, many countries in Europe and elsewhere 13. Owing to the opaqueness of balance sheets in many financial institutions in these countries, the full extent of exposure is, as yet, unknown.

18â•…

Box 1.2

Contagion concepts

In defining contagion here, we follow Kaminsky, Reinhart, and Vegh (2003), who distinguish between two types: (1) the “slow-burn” spillover and (2) the kind of fast burn marked by rapid cross-border transmission that Kaminsky, Reinhart, and Vegh label “fast and furious.” We refer to contagion as an episode in which there are significant immediate effects in a number of countries following an event—that is, when the consequences are fast and furious and evolve over a matter of hours or days. This “fast and furious” reaction is a contrast to cases in which the initial international reaction to the news is muted. The latter cases do not preclude the emergence of gradual and protracted effects that may cumulatively have major economic consequences. We refer to these gradual cases as spillovers. Common external shocks, such as changes in international interest rates or oil prices, are also not automatically included in our working definition of contagion. We add to this classification that common shocks need not all be external. This caveat is particularly important with regard to the current episode. Countries may share common “domestic” macroeconomic fundamentals, such as the bursting of a housing bubble, capital inflow bonanzas, increasing private and (or) public leveraging, and so on. The three pillars of fast and furious contagion are: 1. Surprise crises and anticipated catastrophes: Fast and furious crises and contagion cases have a high degree of surprise associated with them, while their quieter counterparts are more broadly anticipated. 2. Capital flow cycle and leverage: Fast and furious contagion episodes are typically preceded by a surge in capital inflows and rapidly rising leverage, which come to an abrupt halt or sudden stop in the wake of a crisis. The inflow of capital may come from banks, other financial institutions, or bondholders. The debt contracts typically have short maturities (i.e., investors and financial institutions will have to make decisions about rolling over their debts or not doing so.) With fast and furious contagion, investors and financial institutions that are often highly leveraged are exposed to the crisis country. Such investors can be viewed as halfway through the door, ready to back out on short notice. 3. Common creditors: The previous distinction appears to be critical when “potentially affected countries” have a common lender. If the common lender is surprised by the shock in the initial crisis country, there is no time ahead of the impending crisis to rebalance portfolios and scale back from the affected country. In contrast, if the crisis is anticipated, investors have time to limit the damage by scaling back exposure or hedging their positions.

8

[GLOBAL DEBT]

A DECADE OF DEBTâ•… 19

had their own home-grown real estate bubbles (Reinhart and Rogoff 2009). Second, The United States was not alone in running large current account deficits and experiencing a sustained “capital flow bonanza.” Bulgaria, Iceland, Ireland, Latvia, New Zealand, Spain, and the United Kingdom, among others, were importing capital from abroad, which helped fuel a credit and asset price boom (Reinhart and Reinhart 2009). These trends, in and of themselves, made these countries vulnerable to the usual nasty consequences of asset market crashes and capital flow reversals irrespective of what may be happening in the United States. Are more fast and furious episodes or spillovers under way? Applying the criteria that typically characterize fast and furious contagion (see box 1.2) to the current environment yields a mixed picture but one that, on the whole, would suggest contagion (and the more gradual spillover) threats still loom large. Surprise events are (by definition) always a distinct possibility. However, at the time of this writing the precarious nature of balance sheets in much of Europe and the United States is more in the public eye than at the beginning on this crisis in the summer of 2007. This fact is plainly evident in the succession of ratings downgrades of several sovereigns in Europe as well as of Japan. Most recently, of course, Standard and Poor’s has put the United States on notice of a possible downgrade, echoing a similar warning by the International Monetary Fund. These sovereign downgrades have mirrored, to some extent, the general widening and greater heterogeneity in sovereign spreads. As to the capital inflow cycle and leverage, the inflow peaks and surges in fresh private borrowing are well behind us but public debts continue to climb (see figure 1.1) and private deleveraging, especially in Europe, has been (at best) limited (Reinhart and Reinhart 2011b). Highly leveraged public and private sectors have been historically a “contagion amplifier.” So have been common creditors. Apart from the elevated levels of leverage in most advanced economies as discussed, the widespread presence of common creditors (most notable in the euro area as well as the United Kingdom) is a second compelling factor indicating that the scope for fast and furious contagion remains high. This type of financial vulnerability is exacerbated by the lack of transparency in overall cross-border exposure, as highlighted in the extensive new database in MilesiFerretti, Strobbe, and Tamirisa (2010).

IV. Debt and Growth The march from high public indebtedness to sovereign default or restructuring is usually marked by episodes of drama, punctuated by periods of high volatility in financial markets, rising credit spreads, and ratings downgrades. However, the economic impacts of high public indebtedness are not limited to such episodes of high drama, as rising public debts are not universally associated with rising interest rates and imminent expectations of sovereign default (see Gagnon and Hinterschweiger 2011 for a thorough examination of this

20â•…

issue.) Serious public debt overhangs may also cast a shadow on economic growth, even when the sovereign’s solvency is not called into question. In this section we summarize our main findings in Reinhart and Rogoff (2010a, 2010b), elaborate on some methodology issues, and discuss some of the very recent literature that examines the debt and growth connection.

The Basic Exercise and Key Results Our analysis of growth and debt was based on newly compiled data on 44 countries spanning about 200 years. This amounts to 3,700 annual observations and covers a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. The main findings of Reinhart and Rogoff (2010a) are the following. n

First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below 90 percent of GDP.14 Above the threshold of 90 percent, median growth rates fall by 1 percent, and average growth falls considerably more. The threshold for public debt is similar in advanced and emerging-market economies and applies for both the post–World War II period and as far back as the data permit (often well into the 1800s). n Second, emerging markets face lower thresholds for total external debt (public and private)—which is usually denominated in a foreign currency. When total external debt reaches 60 percent of GDP, annual growth declines about 2 percent; for higher levels, growth rates are roughly cut in half. n Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/ GDP is high). The story is entirely different for emerging markets, where inflation rises sharply as debt increases. Figure 1.8 can be used to summarize our main conclusions. The top panel applies to the 20 advanced countries in our 44-country sample (where much of the public debate is centered).15 The remaining two panels of the figure present comparable results for emerging-market public debt and gross external debt.

14. As noted previously, “public debt” here refers to gross central government debt. “Domestic public debt” is government debt issued under domestic legal jurisdiction. Public debt does not include obligations carrying a government guarantee. Total gross external debt includes the external debts of all branches of government as well as private debt issued by domestic private entities under a foreign jurisdiction. 15. The comparable emerging-market exercises are presented in the original working paper (NBER Working Paper 15639, January 2010).

A DECADE OF DEBTâ•… 21

22â•…

Figure 1.8

Debt and real per capita GDP growth: Selected advanced and emerging-market economies, 1946–2009 A. Gross central government debt

per capita GDP growth (percent)

per capita GDP growth (percent)

1. Advanced economies

5.0

5.0

4.0

4.0

3.0

3.0

2.0

2.0

1.0

1.0

0

0

GRAPHICS

Debt/GDP below 30

Debt/GDP 30–60

Debt/GDP 60–90

–1.0 Average

Median

Average

Median

Average

Median

Debt/GDP above 90 percent Average

Median

Debt/GDP below 30

2. Emerging-market economies

Debt/GDP 30–60

Debt/GDP 60–90

Debt/GDP above 90 percent

–1.0 Average

Median

Average

Median

Average

Median

Average

Median

17

(continued on next page)

Figure 1.8

Debt and real per capita GDP growth: Selected advanced and emerging-market economies, 1946–2009 (continued)

B. Gross external (public plus private) debt per capita GDP growth (percent) 1. Emerging-market economies 5.5

4.5

3.5

2.5

1.5

0.5

–0.5

Debt/GDP below 30

Debt/GDP 30–60

Debt/GDP 60–90

Debt/GDP above 90 percent

–1.5 Average

Median

Average

Median

Average

Median

Average

Median

Sources: Reinhart and Rogoff (2010a) and sources cited therein.

In the figure, the annual observations are grouped into four categories, according to the ratio of debt/GDP during that particular year: years when debt-to-GDP levels were below 30 percent; 30 to 60 percent; 60 to 90 percent; and above 90 percent.16 The bars show average and median GDP growth for each of the four debt categories. Note that of the 1,186 annual observations, there are a significant number in each category, including 96 above 90 percent. (Recent observations in that top bracket come from Belgium, Greece, Italy, and Japan.) From the figure, it is evident that there is no obvious link between debt and growth until public debt exceeds the 90 percent threshold. The observations with debt to GDP over 90 percent have median growth roughly 1 percent lower than the lower debt burden groups and mean levels of growth almost 4 percent lower. (Using lagged debt does not dramatically change the picture.) 16. The four “buckets” encompassing low, medium-low, medium-high, and high debt levels are based on our interpretation of much of the literature and policy discussion on what are considDEBT] the World Bank country groupings according to four ered low, high 18 debt [GLOBAL levels. It parallels income groups. Sensitivity analysis involving a different set of debt cutoffs merits exploration, as do country-specific debt thresholds along the broad lines discussed in Reinhart, Rogoff, and Savastano (2003).

A DECADE OF DEBTâ•… 23

Table 1.3

Real GDP growth as the level of government debt varies: Selected advanced economies, 1790–2009 (annual percent change) Central (federal) government debt/GDP Below 30 percent

30 to 60 percent

60 to 90 percent

90 percent and above

Country

Period

Australia

1902–2009

3.1

4.1

2.3

4.6

Austria

1880–2009

4.3

3.0

2.3

n.a.

Belgium

1835–2009

3.0

2.6

2.1

3.3

Canada

1925–2009

2.0

4.5

3.0

2.2

Denmark

1880–2009

3.1

1.7

2.4

n.a.

Finland

1913–2009

3.2

3.0

4.3

1.9

France

1880–2009

4.9

2.7

2.8

2.3

Germany

1880–2009

3.6

0.9

n.a.

n.a.

Greece

1884–2009

4.0

0.3

4.8

2.5

Ireland

1949–2009

4.4

4.5

4.0

2.4

Italy

1880–2009

5.4

4.9

1.9

0.7

Japan

1885–2009

4.9

3.7

3.9

0.7

Netherlands

1880–2009

4.0

2.8

2.4

2.0

New Zealand

1932–2009

2.5

2.9

3.9

3.6

Norway

1880–2009

2.9

4.4

n.a.

n.a.

Portugal

1851–2009

4.8

2.5

1.4

n.a.

Spain

1850–2009

1.6

3.3

1.3

2.2

Sweden

1880–2009

2.9

2.9

2.7

n.a.

United Kingdom

1830–2009

2.5

2.2

2.1

1.8

United States

1790–2009

4.0

3.4

3.3

–1.8

Average

3.7

3.0

3.4

1.7

Median

3.9

3.1

2.8

1.9

Number of observations = 2,317

866

654

445

352

Notes: n.a. denotes no observations were recorded for that particular debt range. There are missing observations, most notably during World War I and II years; further details are provided in the data appendices to Reinhart and Rogoff (2009) and are available from the authors. Minimum and maximum values for each debt range are shown in bold italics. Sources: There are many sources; among the more prominent are International Monetary Fund, World Economic Outlook; OECD; World Bank, Global Development Finance. Extensive other sources are cited in Reinhart and Rogoff (2009).

High Debt Episodes in the Sample The episodes that attract our interest are those where debt levels were historically high. As convenient as it is to focus exclusively on a particular country or a 24â•…

GRAPHICS

3

single episode for a single country (like the United States around World War II, where the data are readily available, or an interesting ongoing case like Japan), the basis for an empirical regularity is multiple observations. Because our data span 44 countries with many going back to the 1800s or at least the beginning of the 19th century, our analysis is based on all the episodes of high (above 90 percent) debt for the post–World War II period; for the pre-war sample it covers all those for which data are available. Table 1.3 is reproduced from Reinhart and Rogoff (2010a) and describes the coverage and the basic statistics for the various debt levels for the advanced economies.17 It is common knowledge that the United States emerged after World War II with a very high debt level. But this also held for Australia, Canada, and most markedly the United Kingdom, where public debt/GDP peaked at near 240 percent in 1948. These cases from the aftermath of World War II are joined in our sample by a number of peacetime high-debt episodes: the 1920s and 1980s to the present in Belgium; the 1920s in France; Greece in the 1920s, 1930s, and 1990s to the present; Ireland in the 1980s; Italy in the 1990s; Spain at the turn of the last century; the United Kingdom in the interwar period and prior to the 1860s; and, of course, Japan in the past decade. As will be discussed, episodes where debt is above 90 percent are themselves rare, and as shown in table 1.3, a number of countries have never had debt entries above 90 percent.

Debt Thresholds and Nonlinearities: The 90 Percent Benchmark Thresholds and nonlinearities play a key role in understanding the relationship between debt and growth that should not be ignored in casual reinterpretations. Thresholds. Anyone who has done any work with data is well aware that mapping a vague concept, such as “high debt” or “overvalued” exchange rates to a workable definition for interpreting the existing facts and informing the discussion requires making arbitrary judgments about where to draw lines. In the case of debt, we worked with four buckets: 0 to 30 percent, 30 to 60 percent, 60 to 90 percent, and over 90 percent. The last one turned out to be the critical one for detecting a difference in growth performance, so we single it out for discussion here. Figure 1.9 shows the public debt to GDP ratio as well as pooled descriptive statistics (inset) for the advanced economies (to complement the countryspecific ones shown in table 1.3) over the post World War II period.18 The median public debt/GDP ratio is 36.4 percent; about 92 percent of the observations fall below the 90 percent threshold (see figure 1.9). In effect, about 76 percent of the observations were below the 60 percent Maastricht criteria. 17. Again, the interested reader is referred to the original working paper version of Reinhart and Rogoff (2010a). See NBER Working Paper 15639 (January 2010). 18. Our sample includes 24 emerging-market countries.

A DECADE OF DEBTâ•… 25

26â•…

Figure 1.9 The 90 percent debt/GDP threshold: 1946–2009, advanced economies probability density function percent of observations 12 annual observations

Public debt/GDP: 1946–2009, 22 advanced economies

10

8

Median

36.4

Average

43.5

Minimum

2.8

Maximum

237.9

Annual observations

1,326.0

90 percent

6

4 91.6 percent of observations below 90 percent

8.4 percent of observations above 90 percent

2

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

110

130

150

170

above

GRAPHICS

public debt/GDP (percent)

19

Notes: The advanced economy sample is the complete IMF grouping (Switzerland and Iceland were added). It includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Sources: Reinhart and Rogoff (2009 and 2010b).

Put differently, our “high vulnerability” region for lower growth (the area under the curve to the right of the 90 percent line) comprises only about 8 percent of the sample population. The standard considerations about type I and type II errors apply here.19 If we raise the upper bucket cutoff much above 90 percent, then we are relegating the high-debt analysis to case studies (the United Kingdom in 1946–50 and Japan in recent years). Only about 2 percent of the observations are at debt-to-GDP levels at or above 120 percent, and that includes the aforementioned cases. If debt levels above 90 percent are indeed as benign as some suggest, one might have expected to see a higher incidence of these over the long course of history. Certainly our read of the evidence, as underscored by the central theme of our 2009 book This Time Is Different: Eight Centuries of Financial Folly, hardly suggests that politicians are universally too cautious in accumulating high debt levels. Quite the contrary, far too often they take undue risks with debt buildups, relying implicitly perhaps on the fact that these risks often take a very long time to materialize. If debt-to-GDP levels over 90 percent are so benign, then generations of politicians must have been overlooking proverbial money on the street. We do not pretend to argue that growth will be normal at 89 percent and subpar (about 1 percent lower) at 91 percent debt/GDP any more than a car crash is unlikely at 54 miles per hour and near certain at 56 miles per hour. However, mapping the theoretical notion of vulnerability regions to bad outcomes by necessity involves defining thresholds, just as traffic signs in the United States specify speed of 55 miles per hour.20 Nonlinear relationship. In Reinhart and Rogoff (2010a), we summarized our results thus: …the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more.

Revisiting figure 1.8 is useful for illustrating the importance of nonlinearities in the debt-growth link. Simply put, for 92 percent of the observations in our sample there is no systematic link between debt and growth.21 Thus, if one were to do a simple scatterplot of all the observations on debt/GDP and on growth one would expect to find a “clouded mess.” We can highlight this general point with the US case. As we noted in the working paper version of Reinhart and Rogoff (2010a), for the period 1790–2009, there are a total of 216 observations of which 211 (or 98 percent) are below the 90 percent debt-to19. The null hypothesis is whatever “normal” growth is versus the alternative of lower growth. 20. These methodology issues are discussed in Kaminsky and Reinhart (1999). 21. Bruno and Easterly (1998) find similar nonlinearities in the inflation-growth relationship.

A DECADE OF DEBTâ•… 27

GDP cutoff. It should be quite obvious that a scatterplot of the US data would not be capable of revealing a systematic pattern (as demonstrated in Iron and Bivens 2010). Indeed, this example illustrates one of our main results: that there is no systematic relationship between debt and growth below a threshold of 90 percent of GDP.

Debt and Growth Causality As discussed, we examine average and median growth and inflation rates contemporaneously with debt. Temporal causality tests are not part of the analysis. The application of many of the standard methods for establishing temporal precedence is complicated by the nonlinear relationship between growth and debt (more of this to follow) that we have alluded to. But where do we place the evidence on causality? For low-to-moderate levels of debt there may or may not be one; the issue is an empirical one, which merits study. For high levels of debt the evidence points to bi-directional causality. Growth-to-debt: As we discuss in section II, our analysis of the aftermath of financial crisis (Reinhart and Rogoff 2008) presents compelling evidence for both advanced and emerging markets over 1800–2008 on the fiscal impacts (revenue, deficits, debts, and sovereign credit ratings) of the recessions associated with banking crises (figure 1.2). There is little room to doubt that severe economic downturns, irrespective of whether their origins was a financial crisis or not, will, in most instances, lead to higher debt/GDP levels contemporaneously and/or with a lag. There is, of course, a vast literature on cyclically adjusted fiscal deficits making exactly this point. Debt-to-growth: A unilateral causal pattern from growth to debt, however, does not accord with the evidence. Public debt surges are associated with a higher incidence of debt crises (figure 1.4).22 This temporal pattern is analyzed in Reinhart and Rogoff (2008) and in the accompanying country-by-country analyses cited therein (Reinhart and Rogoff 2011b). In the current context, even a cursory reading of the recent turmoil in Greece and other European countries can be importantly traced to the adverse impacts of high levels of government debt (or potentially guaranteed debt) on country risk and economic outcomes. At a very basic level, a high public debt burden implies higher future taxes (inflation is also a tax) or lower future government spending, if the government is expected to repay its debts. There is scant evidence to suggest that high debt has little impact on growth. Kumar and Woo (2010) highlight in their cross-country findings that debt levels

22. For a model where credit-financed government deficits lead to a currency crisis, see Krugman (1979).

28â•…

have negative consequences for subsequent growth, even after controlling for other standard determinants in growth equations. For emerging markets, an older literature on the debt overhang of the 1980s frequently addresses this theme.

V. The Aftermath of High Debt: The 1930s and World War II Up until very recently, financial markets and policymakers had all but forgotten that default and restructuring are not alien to the advanced economies. For instance, Reinhart, Rogoff, and Savastano (2003) and Reinhart and Rogoff (2009) document that several now-wealthy countries have a long history of serial default. This section does not attempt to review this rich sovereign debt crisis history; the focus is confined to the last two “global” debt spikes. These two high-debt episodes share some of the characteristics of the current debt spike, as they involve numerous advanced economies (accounting for an important share of world GDP). The first part of the section presents a brief sketch of the last wave of sovereign defaults, restructurings, and forcible conversions in response to the debt overhang during the 1930s that engulfed the advanced economies while the second subsection outlines the more subtle debt restructuring that was facilitated by pervasive financial repression during the 1940s to the 1970s.

Default, Restructurings, and Forcible Conversions in the 1930s Table 1.4 lists the known “domestic credit events” of the Great Depression. Default on or restructuring of external debt (see the notes to the table) also often accompanied the restructuring or default of the domestic debt. All the allied governments, with the exception of Finland, defaulted on (and remained in default through 1939 and never repaid) their World War I debts to the United States as economic conditions deteriorated worldwide during the 1930s.23

Financial Repression in 1940s–70s: The “Quiet” Restructuring Apart from emerging markets, many of which have continued to openly periodically default or restructure their debts (usually at times of severe economic stress) through the present, the only explicit defaults (or restructurings) in advanced economies since World War II were confined to either those of the countries that lost the war (Austria, Germany, Italy, and Japan) or those that never reestablished their credit since slipping into default in the 1930s (Greece, for instance, was in default from 1932 until 1964). Financial repression was the post-World War II “politically correct” replacement for the more open debt restructurings and defaults of the 1930s. 23. Finland, being under continuous threat of Soviet invasion at the time, maintained payments on its debts to the United States so as to maintain the best possible relationship.

A DECADE OF DEBTâ•… 29

Table 1.4

Selected episodes of domestic debt default or restructuring, 1920s–40s

Country

Dates

Commentary

For additional possible domestic defaults in several European countries during the 1930s, see notes below.

Australia

1931/1932

The Debt Conversion Agreement Act in 1931/32 appears to have done something similar to the later New Zealand induced conversion. See New Zealand entry.1

Bolivia

1927

Arrears of interest lasted until at least 1940.

Canada (Alberta)

April 1935

The only province to default—which lasted for about 10 years.

China

1932

First of several “consolidations”, monthly cost of domestic service was cut in half. Interest rates were reduced to 6 percent (from over 9 percent)—amortization periods were about doubled in length.

Greece

1932

Interest on domestic debt was reduced by 75 percent since 1932; domestic debt was about 1/4 of total public debt.

Mexico

1930s

Service on external debt was suspended in 1928. During the 1930s, interest payments included “arrears of expenditure and civil and military pensions.”

New Zealand

1933

In March 1933 the New Zealand Debt Conversion Act was passed providing for voluntary conversion of internal debt amounting to 113 million pounds to an interest rate of 4 percent for ordinary debt and 3 percent for tax-free debt. Holders had the option of dissenting but interest in the dissented portion was made subject to an interest tax of 33.3 percent.1

Peru

1931

After suspending service on external debt on May 29, Peru made “partial interest payments” on domestic debt.

Romania

February 1933

Redemption of domestic and foreign debt is suspended (except for three loans).

Spain

October 1936– April 1939

Interest payments on external debt were suspended; arrears on domestic debt service accumulated.

United States

1933

Abrogation of the gold clause. In effect, the US refused to pay Panama the annuity in gold due to Panama according to a 1903 treaty. The dispute was settled in 1936 when the US paid the agreed amount in gold balboas.

United Kingdom

1932

Most of the outstanding World War I debt was consolidated into a 3.5 percent perpetual annuity. This domestic debt conversion was apparently voluntary. However, some of the World War I debts to the United States were issued under domestic (UK) law (and therefore classified as domestic debt) and these were defaulted on following the end of the Hoover 1931 moratorium. (continued on next page)

4 [GLOBAL DEBT] 30â•…

Table 1.4

Selected episodes of domestic debt default or restructuring, 1920s–40s (continued)

Uruguay

November 1, 1932– February, 1937

After suspending redemption of external debt on January 20, redemptions on domestic debt were equally suspended.

Austria

December 1945

Restoration of schilling (150 limit per person); remainder placed in blocked accounts. In December 1947, large amounts of previously blocked schillings were invalidated and rendered worthless; temporary blockage of 50 percent of deposits.

Germany

June 20, 1948

Monetary reform limiting 40 deutsche mark per person; partial cancellation and blocking of all accounts.

Japan

March 2, 1946–1952

After inflation, exchange of all bank notes for new issue (1 to 1) limited to 100 yen per person; remaining balances were deposited in blocked accounts.

Russia

1947

The monetary reform subjected privately held currency to a 90 percent reduction.

April 10, 1957

Repudiation of domestic debt (about 253 billion rubles at the time).

1. See Schedvin (1970) and Prichard (1970), for accounts of the Australian and New Zealand conversions, respectively, during the Depression. Michael Reddell kindly alerted us to these episodes and references. Notes: We have made significant further progress in sorting out the defaults on World War I debts to the United States, notably by European countries. In all cases these episodes are classified as a default on external debts. However, in some cases—such as the United Kingdom—some of the World War I debts to the United States were also issued under domestic law and, as such, would also qualify as a domestic default. The external defaults on June 15, 1934 included Austria, Belgium, Czechoslovakia, Estonia, France, Greece, Hungary, Italy, Latvia, Poland, the United Kingdom. Only Finland made payments. See New York Times, June 15, 1934.

Generally, the aims of debt restructuring are (1) reducing the value of the stock of existing debts (haircut); (2) reducing debt servicing costs (by cutting or capping interest rates); and (3) minimizing rollover risk by lengthening maturities and/or shifting into nonmarketable debt. Financial repression achieves all three goals of debt restructuring—albeit that the first (reducing the value) is achieved more gradually than in open restructurings. Thus, as argued in Reinhart and Rogoff (2009), financial repression—a hallmark of the 1940s–70s—is nothing other than a more subtle form of debt restructuring. Legislation or “moral suasion” limiting the range and amounts of nongovernment debt domestic assets financial institutions can hold; limiting further (or outright forbidding) holdings of foreign assets; and requiring financial institutions to hold more government debt were all part of the “financially repressed landscape.” A whole range of interest rate ceilings (for example, on deposits) made holding low-yielding government bonds also more palatable for individuals as well as institutions. Pension funds have historically provided the “captive audience par excellence” for placing vast sums of government debt at questionable rates of return (often negative ex post in real terms). It is worth noting that the real ex post interest rate on public debt (appropriately weighted GRAPHICS 5 A DECADE OF DEBTâ•… 31

Table 1.5

Debt liquidation through financial repression: Italy, United Kingdom, and United States, 1945–55 Annual average: 1946–1955

Public debt/GDP

1945

1955 (actual)

1955 without repression savings (estimate)3

79.2

38.1

129.3

United Kingdom

215.6

138.2

182.9

4.5

5.9

United States

116.0

66.2

118.6

5.2

4.2

Country Italy1 2

“Financial repression revenue”/ GDP 9.1

Inflation 10.8

1. Italy was in default on its external debt 1940–46. 2. The savings from financial repression are a lower bound, as we use the “official” consumer price index for this period in the calculations and inflation is estimated to have been substantially higher than the official figure (see for example Friedman and Schwartz 1963). 3. The simple cumulative annual savings without compounding. Notes: The peaks in debt/GDP were: Italy 129.0 in 1943; United Kingdom 247.5 in 1946; United States 121.3 in 1946. An alternative interpretation of the financial repression revenue is simply as savings in interest service on the debt. Source: Reinhart and Sbrancia (2011).

by the type of debt instrument) was negative for US debt for 25 percent of the years during 1945–80, while the comparable share for the United Kingdom was nearly 50 percent, as Reinhart and Sbrancia (2011) document. Table 1.5 illustrates, for the examples of Italy, the United Kingdom, and the United States, the important role played by financial repression (combined with some inflation) in the crucial debt-reduction decade that followed World War II.24 The savings range from an average of about 9 percent for Italy (which had higher inflation) to about 5 percent for the United States and United Kingdom. In effect, the savings from financial repression are a lower bound for the United Kingdom, as we use the “official” consumer price index for this period in the calculations and inflation is estimated to have been substantially higher than the official figure (see, for example, Friedman and Schwartz 1963). Also, other factors (such as the 1951 US conversion, which swapped marketable for nonmarketable debt) do not factor into these simple debt-reduction calculations. The simple fact is that ex post real interest rates were significantly lower in both advanced and emerging-market economies during the financial repression era that is sandwiched between World War II and the high real interest rates of the 1930s and the post-financial and capital account liberalization that has swept through financial markets since the mid-1980s.

24. See Reinhart and Sbrancia (2011) for a full fledged analysis of the international role played by financial repression in reducing the World War II debt overhang.

6 [GLOBAL DEBT] 32â•…

VI. Conclusion One need look no further than the stubbornly high unemployment rates in the United States and other advanced economies to be convinced of the importance of developing a better understanding of the growth prospects for the decade ahead. We have presented evidence suggesting that high levels of debt dampen growth. One can argue that the United States can tolerate higher levels of debt more than other countries can without having its solvency called into question. That is probably so.25 We have shown in our earlier work that a country’s credit history plays a prominent role in determining what levels of debt it can sustain without landing on a sovereign debt crisis. More to the point of this analysis, however, we have no comparable evidence yet to suggest that the consequences of higher debt levels for growth will be different for the United States than for other advanced economies. Figure 1.10, which plots total (public and private) credit market debt outstanding for the United States during 1916 to 2010Q1, makes this point clear.26 Despite considerable deleveraging by the private financial sector, total debt remains near its historic high in 2008. Total public-sector debt during the first quarter of 2010 is 117 percent of GDP; since 1916 (when this series begins) it has been higher only during a one-year stint at 119 percent in 1945. Perhaps soaring US debt levels will not prove to be a drag on growth in the decades to come. However, if history is any guide, that is a risky proposition, and overreliance on US exceptionalism may only prove to be one more example of the This Time is Different Syndrome.27 The sharp runup in public-sector debt will likely prove one of the most enduring legacies of the 2007–09 financial crises in the United States and elsewhere. We examine the experience of 44 countries spanning up to two centuries of data on central government debt, inflation, and growth. Our main finding is that across both advanced countries and emerging markets, high debt/ GDP levels (90 percent and above) are associated with notably lower-growth outcomes. Much lower levels of external debt/GDP (60 percent) are associated with adverse outcomes for emerging-market growth. Seldom do countries “grow” their way out of debts. The nonlinear response of growth to debt as

25. Indeed, this is the central argument in Reinhart and Reinhart (2010), originally published on November 17, 2008. 26. The Flow of Funds data aggregate the private and public sectors, where the latter comprises federal (net), state, and local government enterprises. To reiterate, this is not the public debt measure used in our historical analysis; we use gross central government debt (which for the United States is at present about 90 percent of GDP). 27. The This Time is Different Syndrome is rooted in the firmly held beliefs that (1) financial crises and negative outcomes are something that happen to other people in other countries at other times (these do not happen here and now to us); (2) we are doing things better, we are smarter, we have learned from the past mistakes; and (3) as a consequence, old rules of valuation are not thought to apply any longer.

A DECADE OF DEBTâ•… 33

34â•… 20

Figure 1.10 Total (public and private) credit market debt outstanding: United States, 1916–2010Q1

[GLOBAL DEBT]

percent of GDP 400 Debt/GDP Private

350

300

Public

Median

117.4

61.5

Maximum

282.9

2008

119.2

1946

Minimum

35.9

1946

11.5

1916

2010 Q1

234.8

117.4

250 1933, suspension of the Gold Clause

200

150

100 1916

1926

1936

1946

1956

1966

First year of banking crisis

1976

1986

1996

2006

Default

Notes: Beginning in 2010 Q1, almost all Fannie Mae and Freddie Mac mortgage pools are consolidated in Fannie Mae’s and Freddie Mac’s balance sheets and, thus, are included in the debt of government Source: Chapter 2.

debt grows toward historical boundaries is reminiscent of the “debt intolerance” phenomenon developed in Reinhart, Rogoff, and Savastano (2003). As countries hit debt intolerance ceilings, market interest rates can begin to rise quite suddenly, forcing painful adjustment. For many if not most advanced countries, dismissing debt concerns at this time is tantamount to ignoring the proverbial elephant in the room. So is pretending that no restructuring will be necessary. It may not be called restructuring, so as not to offend the sensitivities of governments that want to pretend to find an advanced-economy solution for an emerging market style sovereign debt crisis. As in other debt crisis resolution episodes, debt buybacks and debtequity swaps are a part of the restructuring landscape. Financial repression is not likely to also prove a politically correct term—so prudential regulation will probably provide the aegis for a return to a system more akin to what the global economy had prior to the 1980s market-based reforms. The process where debts are being “placed” at below-market interest rates in pension funds and other more captive domestic financial institutions is already under way in several countries in Europe. Central banks on both sides of the Atlantic have become even bigger players in purchases of government debt, possibly for the indefinite future. For the United States, fear of currency appreciation continues to drive central banks in many emerging markets to purchase US government bonds on a large scale. In other words, markets for government bonds are increasingly populated by nonmarket players, calling into question the information content of bond prices relative to their underlying risk profile—a common feature of financially repressed systems.

References Arellano, Cristina, and Narayana Kocherlakota. 2008. Internal Debt Crises and Sovereign Defaults. NBER Working paper 13794. Cambridge, MA: National Bureau of Economic Research. Bordo, Michael, and Barry Eichengreen. 1999. Is Our Current International Economic Environment Unusually Crisis Prone? Paper prepared for Reserve Bank of Australia conference on private capital, Sydney, August. Bordo, Michael, Barry Eichengreen, Daniela Klingebiel, and Maria Soledad Martinez-Peria. 2001. Is the Crisis Problem Growing More Severe? Economic Policy 16 (April): 51–82. Bruno, Michael, and William Easterly. 1998. Inflation Crises and Long-Run Growth. Journal of Monetary Economics 41, no. 1 (February): 3–26. Calvo, Guillermo. 1988. Servicing the Public Debt: The Role of Expectations. American Economic Review 78, no. 4 (September): 647–61. Caprio, Gerard, Daniela Klingebiel, Luc Laeven, and Guillermo Noguera. 2005. Banking Crisis Database. In Systemic Financial Crises, ed. Patrick Honohan and Luc Laeven. Cambridge: Cambridge University Press. Checherita, Christina, and Philipp Rother. 2010. The Impact of High and Growing Debt on Economic Growth and Empirical Investigation for the Euro Area. European Central Bank Working Paper Series no. 1237 (August). Frankfurt: European Central Bank. Diaz-Alejandro, Carlos. 1985. Goodbye Financial Repression, Hello Financial Crash. Journal of Development Economics 19.

A DECADE OF DEBTâ•… 35

Easterly, William R. 1989. Fiscal Adjustment and Deficit Financing During the Debt Crisis. In Dealing with the Debt Crisis, ed. I. Husain and I. Diwan. Washington: World Bank. Eichengreen, Barry. 1992. Golden Fetters The Gold Standard and the Great Depression 1919–1939. New York: Oxford University Press. Eichengreen, Barry, and Peter H. Lindert, eds. 1989. The International Debt Crisis in Historical Perspective. Cambridge, MA: MIT Press. Flandreau, Marc, and Frederic Zumer. 2004. The Making of Global Finance, 1880–1913. Paris: Organization for Economic Cooperation and Development. Fostel, Ana, and John Geanokoplos. 2008. Leverage Cycles and the Anxious Economy. American Economic Review 98, no. 4: 1211–44. Friedman, Milton, and Anna Jacobson Schwartz. 1963. A Monetary History of the United States 1867– 1960. Princeton: Princeton University Press. Gagnon, Joseph, with Marc Hinterschweiger. 2011. The Global Outlook for Government Debt over the Next 25 Years: Implications for the Economy and Public Policy. Policy Analyses in International Economics 94. Washington: Peterson Institute for International Economics. Geanokoplos, John. 2009. The Leverage Cycle. In NBER Macroeconomic Annual 2009, volume 24, ed. D. Acemoglu, K. Rogoff and M. Woodford. Chicago: University of Chicago Press. Giovannini, Alberto, and Martha de Melo. 1993. Government Revenue from Financial Repression. American Economic Review 83, no. 4: 953–63. Gopinath, Gita, and Mark Aguiar. 2006. Defaultable Risk, Interest Rates and the Current Account. Journal of International Economics 69, no. 1 (June). Jeanne, Olivier. 2009. Debt Maturity and the International Financial Architecture. American Economic Review 99, no. 5: 2135–48. Kaminsky, Graciela L., and Carmen M. Reinhart. 1999. The Twin Crises: The Causes of Banking and Balance of Payments Problems. American Economic Review 89, no. 3 (June): 473–500. Kaminsky, Graciela L., Carmen M. Reinhart, and Carlos Vegh. 2003. The Unholy Trinity of Financial Contagion. Journal of Economic Perspectives 17, no. 4 (Fall): 51–74. Krugman, Paul R. 1979. A Model of Balance of Payments Crises. Journal of Money, Credit and Banking 11 (August): 311–25. Kindleberger, Charles P. 1989. Manias, Panics and Crashes: A History of Financial Crises. New York: Basic Books. Lazaretou, Sophia. 2005. Greek Monetary Economics in Retrospect: The Adventures of the Drachma. Economic Notes by Banca Monte dei Paschi di Siena 34, no. 3: 331–70. Kumar, Mohan, and Jaejoon Woo. 2010. Public Debt and Growth. IMF Working Paper WP/10/174 (July). Washington: International Monetary Fund. Lindert, Peter H., and Peter J. Morton. 1989. How Sovereign Debt Has Worked. In Developing Country Debt and Economic Performance, volume 1, ed. Jeffrey Sachs. Chicago: University of Chicago Press. Mendoza, Enrique G., and Marco E. Terrones. 2008. An Anatomy of Credit Booms: Evidence from Macro Aggregates and Micro Data. NBER Working Paper 14049 (May). Cambridge, MA: National Bureau of Economic Research. Milesi-Ferretti, Gian Maria, Francesco Strobbe, and Natalia Tamirisa. 2010. Bilateral Financial Linkages and Global Imbalances: A View on The Eve of the Financial Crisis. IMF Working Paper 10/257. Washington: International Monetary Fund. Obstfeld, Maurice, and Kenneth Rogoff. 1995. Foundations of International Economics. Cambridge, MA: MIT Press. Prichard, Muriel F. Lloyds. 1970. An Economic History of New Zealand to 1939. Auckland: Collins.

36â•…

Reinhart, Carmen M., and Vincent R. Reinhart. 2009. Capital Flow Bonanzas: An Encompassing View of the Past and Present. In NBER International Seminar in Macroeconomics 2008, ed. Jeffrey Frankel and Francesco Giavazzi. Chicago: Chicago University Press for National Bureau of Economic Research. Reinhart, Carmen M., and Vincent R. Reinhart. 2010. Is the US Too Big to Fail? VoxEU, May 9, www. voxeu.org. Originally posted November 17, 2008. Reinhart, Carmen M., and Vincent R. Reinhart. 2011 (forthcoming). After the Fall. Forthcoming in Federal Reserve Bank of Kansas City Economic Policy Symposium, Macroeconomic Challenges: The Decade Ahead, Jackson Hole, Wyoming, August 26-28, 2010. Reinhart, Carmen M., and Kenneth S. Rogoff. 2004. The Modern History of Exchange Rate Arrangements: A Reinterpretation. Quarterly Journal of Economics CXIX, no. 1 (February): 1–48. Reinhart, Carmen M., and Kenneth S. Rogoff. 2008. This Time is Different: A Panoramic View of Eight Centuries of Financial Crises. NBER Working Paper 13882 (March). Cambridge, MA: National Bureau of Economic Research. Reinhart, Carmen M., and Kenneth S Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton: Princeton University Press (October). Reinhart, Carmen M., and Kenneth S. Rogoff. 2010a. Growth in a Time of Debt. American Economic Review 100, no. 2 (May): 573–78. Also published as NBER Working Paper 15639 (January 2010). Reinhart, Carmen M., and Kenneth S. Rogoff. 2010b. Debt and Growth Revisited. VoxEU, August 11, www.voxeu.org. Reinhart, Carmen M., and Kenneth S. Rogoff. 2011a (forthcoming). Domestic Debt: The Forgotten History. Economic Journal (May). Reinhart, Carmen M., and Kenneth S Rogoff. 2011b (forthcoming). From Financial Crash to Debt Crisis. American Economic Review. Also published as NBER Working Paper 15795 (March 2010). Reinhart, Carmen M., and M. Belen Sbrancia. 2011. The Liquidation of Government Debt. Working Paper 11-10. Washington: Peterson Institute for International Economics. Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano. 2003. Debt Intolerance. Brookings Papers on Economic Activity 1 (Spring): 1–74. Rodrik, Dani, and Andres Velasco. 2000. Short-Term Capital Flows. In Annual World Bank Conference on Development Economics (April). Washington: World Bank. Schedvin, C. B. 1970. Australia and the Great Depression. Sydney: Sydney University Press. Velasco, Andres. 1987. Financial and Balance-of-Payments Crises. Journal of Development Economics 27, no. 1/2 (October): 263–83. Winkler, Max. 1933. Foreign Bonds: An Autopsy. Philadelphia: Roland Sway Co. Wynne, William H. 1951. State Insolvency and Foreign Bondholders: Selected Case Histories of Governmental Foreign Bond Defaults and Debt Readjustments II. London: Oxford University Press.

A DECADE OF DEBTâ•… 37

Chartbook of Country Histories of Debt, Default, and Financial Crises

2

Carmen M. Reinhart

I. Preamble This chartbook provides a pictorial history, on a country-by-country basis, of debt and economic crises of various forms. It systematically illustrates for 70 countries the individual timeline of public and private debts, banking, sovereign domestic and external debt crises, and hyperinflation, starting from a country’s independence (and even prior to that in numerous cases) to the present. The dating of the largest output declines and a country’s history with International Monetary Fund (IMF) programs since World War II to deal with an assortment of economic ills contribute to the chronologies. The individual country histories are often fascinating in their own right, highlighting that virtually no country has escaped unscathed from economic crises of one form or another. In effect, in a number of countries, financial crises are more “a way of life” affecting all, if not most, generations. Black swans are not that rare. The prologue to this chartbook is minimalist by design and is organized as follows. The next section offers an essential guide to the country charts and the accompanying tables, clarifies methodological issues, and delineates the approach followed to document the vast number of sources referenced in this analysis. Section III summarizes some of the main (common or recurrent) themes and patterns that (collectively) the country histories reveal. Some of these are 39

documented in the literature while others merit considerable further study. These “big picture” themes include the repeated-game nature of sovereign debt crises and the fact that serial default is commonplace among today’s emerging markets just as it was among advanced economies in an earlier era needs little commentary, as even a casual perusal of the charts display this historical pattern. The serial nature of banking crises (particularly among the more developed economies prior to World War II) is equally compelling. Nearly all of the 21 advanced economies in the sample record an impressive crisis tally, especially from the 1880s to the 1930s. The episodes where there are surges in private debt before the crisis and public debts after the crisis are not only numerous but also span across advanced and emerging-market economies in nearly all regions.

II. Key to Figures and Methodology Notes For working definitions of banking, currency, debt, and inflation crises, see the extensive discussion in Reinhart and Rogoff (2009 and 2010). As to the crises highlighted in the country profiles, our focus is on primarily external sovereign default (also its less common counterpart—domestic sovereign default) and banking crises. Many countries have a rich history of recurring (and often chronic) exchange rate crashes and inflation crises, particularly (but not exclusively) in post–World War II Latin America. We only provide limited information on these recurring follies in monetary history.1 We do include, highlight, and date all hyperinflation episodes, as these have been associated with the complete or near complete liquidation (through de facto default) of domestic-currency debts.

Key to Figures Besides the events discussed above, in a few charts we highlight “near-default” episodes, which involve some form of international assistance to avoid a default or a restructuring. Their dates are also listed in the first column of the accompanying table. Some examples of subsovereign defaults (by states or provinces) are also flagged. In a few figures, historic currency crashes (such as the collapse of an 80-year old peg) are highlighted as well. More mundane episodes of inflation and currency crises are not shown. However, the full sample incidence (share of years) in an inflation crisis is reported in the table below the figure, so as to provide information on chronic inflation problems.2 The

1.â•‡ In the tables that accompany each country profile, we do provide, as summary statistic on inflation crises, the share of years with annual inflation above 20 per cent per annum. This inflation performance also gives a reasonable indication of the incidence of currency crashes. 2.â•‡ For evidence on the correlation and overlap between currency crashes and inflation crises, see Reinhart and Rogoff (2010).

40â•‡â•‡

major output collapses shown in the tables that accompany the figures and the numerous IMF programs since 1952 (listed as a memorandum item at the bottom of the table) are not depicted in the figures, to avoid compromising clarity.

Insets of Smaller Tables and Charts in Figures Insets are used throughout to provide complementary information to that shown in the main figure. For example, for many advanced economies, an inset plots household credit to GDP from the mid-1990s to the present to highlight trends in private debts ahead of the 2007–08 crisis. In other cases, these insets provide information on the maturity composition of the debt (public or private, as the case may be) on the eve of a banking crisis, be it default or hyperinflation. The distribution of public and private debt before and after a crisis also provides documentation of the numerous crisis cases where the government assumed important quantities of private debts.

Descriptive Statistics in Tables for Each Country Descriptive statistics are mostly self-explanatory, but two particulars merit explanation. The first year of banking crises are listed and those shown in italics indicate that the episode in question was not deemed to be a systemicÂ€crisis. Near-default episodes are also shown in italics and not counted in the tally of default. The last column provides information on the largest annual output declines, usually the top five, but more or less when relevant. Both the year and the percent decline (in parentheses) are given. For full output collapse episodes, the interested reader is referred to Barro and Ursua (2008). The bottom portion of the table gives memorandum items on IMF programs with the country over the period from 1952 to 2009. The first year of the program is listed as well as the total number of programs. The relevant sources are discussed below.

Debt Ratios Debt is usually shown as a percent of GDP and in a few cases as a percent of exports. In a handful of cases we have debt data for the earlier part of the 19th century but no GDP or trade measure to scale the debt data by. In those few cases, we show changes in debt (often over three years) to provide an indication of the debt cycle. The nominal GDP data come from numerous scholars as well as official statistical sources. For a number of developing countries we have more data on exports than for GDP (in all cases we have post–World War II nominal GDP data). In these cases the figures show the actual debt/GDP ratio for the period during which GDP data are available (say, post-1920s) and use the debt/exports ratio times the average export to GDP ratio (for the period during which both series overlap) to back-cast the series. A Decade of Debtâ•‡â•‡ 41

References and Sources Most figures list the main source as Reinhart and Rogoff (2009), which has extensive data appendices listing sources series by series and country by country over different subperiods. Additional sources listed below each figure usually indicate that we came across these sources subsequent to the publication of Â�ReinÂ�hart and Rogoff (2009). Prominent examples of the recent discoveries include detailed recent historical studies of Italian, Greek, Dutch, and Swedish public debts (Maura Francese and Angelo Pace for Italy, Sophia Lazaretou on Greek 19th century domestic debts, Frit Bos for the Netherlands, and Klas Fregert and Roger Gustafsson for Sweden.) As the sample was extended to include Bulgaria, Ghana, Iceland, Ireland, and Switzerland, pertinent sources for these are also listed in the relevant country page. Finally, the sources for the IMF programs are Bird, Hussain, and Joyce (2004), Mody and Saravia (2008), and the IMF’s Annual Reports for several years to update these studies through 2009.

III. Debt and Crises: Main Themes This section highlights some of the issues where the collective evidence from the country histories is particularly illuminating. Throughout, we use country examples or specific crises episodes to illustrate particular points. 1. Serial default is a widespread phenomenon across emerging markets and several advanced economies. Figures 2.8a and 2.26 for Brazil and Greece, respectively (among many more that are similar), call attention to this point by simply shading the years in default throughout the sample; the summary table also lists the timing and duration of each default spell while the tally entry (bottom of column 1) reports the default tally for 1800–2009. Countries such as France and Spain have a higher count if pre-1800 default episodes are counted. 2. Prior to World War II, serial banking crises was the norm in the advanced economies but as the larger emerging markets developed a financial sector in the late 1800s, they joined the “serial banking” crisis club. Country histories for Belgium (figure 2.6), Canada (figure 2.10a), among others, illustrate this pattern. The world financial centers (the United Kingdom, figure 2.65a, and the United States, figure 2.66a) take the lead in serial banking crises. One can speculate that the less-developed economies substitute foreign bankers for nonexistent domestic ones. As such, when acute sovereign fiscal difficulties arise, they become manifest in serial external default rather than serial domestic banking crises. 3. In light of serial debt and banking crises (not to mention chronic currency and price instability), it is not surprising to see a similar serial pattern in the incidence of IMF programs. Peru and the Philippines set the record with 24 and 23 programs, respectively. However, IMF programs were not always 42â•‡â•‡

in the exclusive domain of emerging markets. During the 1950s–1970s, the IMF was more like the discount window of a central bank and did not carry the stigma of the default or near default cases. Among the advanced economies, IMF programs were far more common during 1950s–early 1980s; the United Kingdom holds the record with 11 programs, and Portugal was the most recent case, with a program in the mid 1980s.3 4. Private debts typically surge prior to banking crises. This pattern is evident in total external debt (a stock), capital inflow bonanzas (a flow), domestic banking sector credit (a stock), or any combination of these.4 Public debts may or may not surge ahead of banking crises. Indeed, especially in financial repression cases, the government makes efforts to stuff its debts in “captive” bank balance sheets; also, procyclical fiscal policies, where the government amplifies the boom-bust cycle in total debt (as documented in Kaminsky, Reinhart, and Vegh 2005), all too often reinforce the boom in private indebtedness ahead of the banking crisis. â•… For external debts, see figures 2.30b and 2.62a for Iceland and Thailand, respectively. Surges in capital inflows do not last forever. When they end, countries often display Calvo-type sudden stop syndrome, even in crises of an earlier century in advanced economies.5 The US experience during 1865–1913, shown in figure 2.66b, exemplifies this behavior. Domestic credit climbs sharply prior to the banking crisis and unwinds afterward— the examples from banking in Colombia (figure 2.14b) and Norway (figure 2.47b) demonstrate this time profile. By contrast, the famous (or infamous) lost decade and bank debt overhang in post-1992 crisis Japan is evident from figure 2.35b. The coverage on domestic credit boom in this chartbook is not intended to be as comprehensive as public and external debt, which is the primary focus. However, the pattern alluded to here is strongly supported by the evidence from studies that have focused primarily on the domestic credit cycle. The most comprehensive in terms of country coverage is Mendoza and Terrones (2008), who find most booms are followed by currency crises, banking crises, or both. The smaller country set for the 1880–2008 period studied in Schularick and Taylor (2009) presents similar findings.6 5. Banking crises most often either precede or coincide with sovereign debt crises. To be clear, we are referring to “domestic” banking crises; the issue of whether banking crises in the financial centers precede domestic banking crises and or sovereign defaults or restructurings is examined in some detail in 3.â•‡ Bird et al. (2004) aptly title their paper on IMF programs “Many Happy Returns?” 4.â•‡ The term “capital flow bonanza” is introduced in Reinhart and Reinhart (2009) and refers to a surge in capital inflows (over and beyond their historic norm). 5.â•‡ Calvo, Izquierdo, and Loo-Kung (2006), for example. 6.â•‡ Kaminsky and Reinhart (1999) and Gourinchas, Valdes, and Landerretch (2001) also document for different samples this boom-crisis-bust pattern.

A Decade of Debtâ•‡â•‡ 43

Reinhart and Rogoff (2010). The reasons for this temporal sequence may be the contingent liability story emphasized by Diaz-Alejandro (1985) and formalized in Velasco (1987), in which the government takes on massive debts from the private banks, thus undermining its solvency.7 Even absent large-scale bailouts (and without counting the postcrisis new government guarantees), in Reinhart and Rogoff (2009) we establish that largely owing to collapsing revenues, government debts typically rise by about 86 percent in the three years following a systemic financial crisis. This sets the stage for rating downgrades and, in the worst scenario, default. â•… The list of country examples of this sequencing is too long to enumerate, and we would highlight as illustrative the Barings 1891 crisis in Argentina (figure 2.3b), Austria’s banking crisis in 1931 and subsequent default in 1932 (figure 2.5a), and Indonesia’s 1997–98 banking crisis and 1999–2000 default (figure 2.32a). 6. Public debts follow a repeated boom-bust cycle; many (if not most) of the bust phase involved a debt crisis in emerging markets. Public-sector borrowing surges as the crisis nears. Debts continue to rise after default, as arrears accumulate and GDP contracts markedly.8 If there is an exchange rate crash associated with default, as shown in Reinhart (2002), the valuation effect on external debts also contributes to further increase in debt/GDP ratios. â•… The boom-bust episodes are very numerous cutting across regions and time. The crisis episode in figure 2.69 for Zambia illustrates the precrisis surge in public debt—as well as its continued climb in the early stage of default. 7. As Douglas Diamond and Philip Dybvig (1983) suggest in their famous framework of banking crises, short-term debts (public and private) escalate on the eve of banking crisis and sovereign defaults.9 This pattern is also consistent with He and Xiong’s (2010) setting, where creditors have incentives to shorten debt maturity to protect themselves against runs by other creditors. Most famously, Mexico ramped up its short-term debt issuance just in advance of its “Tesobonos” crisis in 1994, as shown in figure 2.40b. In the march toward hyperinflation, long-term debts disappear altogether; the German hyperinflation of 1923–24 (figure 2.24a) demonstrates these dynamics. 8. Private debts become public debts—after the crisis. Several examples from the debt crisis that engulfed Latin America in the early 1980s and lasted a decade are documented in various insets that document the rising share of private “hidden debts” carrying implicit government guarantees (figure 2.62a for Thailand, among others; figure 2.19b for Ecuador, for example).10 7.â•‡ See Arellano and Kocherlakota (2008) for a framework that is consistent with these dynamics. 8.â•‡ See Reinhart and Rogoff (2008) for evidence on output behavior before, during, and after debt crises. 9.â•‡ See Chang and Velasco (2001) for an open-economy treatment of Diamond and Dybvig (1983). 10.â•‡ For a discussion of hidden public debt see Reinhart and Rogoff (2008).

44â•‡â•‡

References Arellano, Cristina, and Narayana Kocherlakota. 2008. Internal Debt Crises and Sovereign Defaults. NBER Working Paper W13794. Cambridge, MA: National Bureau of Economic Research. Barro, Robert J., and José Ursúa. 2008. Macroeconomic Crises Since 1870. NBER Working Paper 13940 (April). Cambridge, MA: National Bureau of Economic Research. Bassino, Jean-Pascal, and Pierre van del Eng. 2006. New Benchmark of Wages and GDP, 1913–70. Mimeograph. Montpellier University, France. Bird, G.. M. Hussain, and J. P. Joyce. 2004. Many Happy Returns: Recidivism and the IMF.” Journal of International Money and Finance 23, no. 2 (March): 231–51. Bos, F. 2007. The Dutch Fiscal Framework: History, Current Practice and the Role of the CPB. CPB Document 150. The Hague: CPB Netherlands Bureau for Economic Policy Analysis. Butlin, S. J. 1968. Foundations of the Australian Monetary System, 1788–1851. Sydney: Sydney University Press. Calvo, Guillermo A., Alejandro Izquierdo, and Rudy Loo-Kung. 2006. Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects. Journal of International Economics 9, no. 1: 231–54. Chang, Roberto, and Andres Velasco. 2001. A Model of Financial Crises in Emerging Markets. Quarterly Journal of Economics 116, no. 2: 489–517. Creutzberg, P. 1976. Changing Economy in Indonesia, Volume 2: Public Finance 1816–1939. The Hague: Martinus Nijhoff. Diamond, Douglas, and Philip Dybvig. 1983. Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy 91, no. 3 (June): 401–19. Diaz-Alejandro, Carlos. 1985. Goodbye Financial Repression, Hello Financial Crash. Journal of Development Economics 19. Diaz, José B., Rolf Lüders, and Gert Wagner. 2005. Chile, 1810–2000, La Republica en Cifras. Instituto de Economía, Pontificia Universidad Católica de Chile, Santiago. Mimeo (May). Eitrheim, Ø., K. Gerdrup, and J. T. Klovland. 2004. Credit, Banking and Monetary Developments in Norway 1819–2003. In Historical Monetary Statistics for Norway, 1819–2003, ed. Ø. Eitrheim, J.Â€T. Klovland, and J. F. Qvigstad. Norges Bank Occasional Papers no. 35: 377–408. Francese Maura, and Angelo Pace. 2008. Il debito pubblico italiano dall’Unità a oggi. Una ricostruzione della serie storica. Banca d’Italia Occasional Paper no. 31. Rome. Fregert, K., and R. Gustafsson. 2008. Fiscal Statistics for Sweden 1719–2003. Research in Economic History 25: 137–91. Gold, Joseph. 1970. Stand-By Arrangements of the International Monetary Fund. Washington: International Monetary Fund. Gourinchas, Pierre-Olivier, Rodrigo Valdes, and Oscar Landerretch. 2001. Lending Booms: Latin America and the World. Economia (Spring): 47–99. Hanke, Steve H. 2008. New Hyperinflation Index (HHIZ) Puts Zimbabwe Inflation at 89.7 Sextillion Â�Percent. Washington: Cato Institute (November). Available at www.cato.org/zimbabwe He, Zhiguo, and Wei Xiong. 2010. Dynamic Debt Runs. Mimeograph. University of Chicago and Princeton University, February. Government Offices of Iceland. 2010. Historical Statistics of Iceland. Available at http://www2.stjr.is/ frr/thst/rit/sogulegt/english.htm#8. Junguito, Roberto, and Hernán Rincón. 2004. La política fiscal en el siglo XX en Colombia. Borradores de Economía, no. 318. Banco de la República. Kaminsky, Graciela L., and Carmen M. Reinhart. 1999. The Twin Crises: The Causes of Banking and Balance of Payments Problems. American Economic Review 89, no.4 (June): 473–500.

A Decade of Debtâ•‡â•‡ 45

Kaminsky, Graciela, Carmen M. Reinhart, and Carlos A. Végh. 2005. When It Rains, It Pours: Procyclical Capital Flows and Policies. In NBER Macroeconomics Annual 2004, volume 19, ed. Mark Gertler and Kenneth S. Rogoff. Cambridge, MA: MIT Press. Kostelenos, G., S. Petmezas et al. 2007. Gross Domestic Product 1830–1939. Sources of Economic History of Modern Greece. Historical Archives of the National Bank of Greece. Lazaretou, Sophia. 2005. Greek Monetary Economics in Retrospect: The Adventures of the Drachma. Economic Notes by Banca Monte dei Paschi di Siena 34, no. 3: 331–70. Levandis, John Alexander. 1944. The Greek Foreign Debt and the Great Powers, 1821–1898. New York: Columbia University Press. Mendoza, Enrique G., and Marco E. Terrones. 2008. An Anatomy of Credit Booms: Evidence from macro Aggregates and Micro Data. NBER Working Paper 14049 (May). Cambridge, MA: National Bureau of Economic Research. Mody, Ashoka, and Diego Saravia. 2008. From Crisis to IMF-Supported Program: Does Democracy Impede the Speed Required by Financial Markets? IMF Working Paper 08/276. Washington: International Monetary Fund. National Treasury Management Agency (Ireland). 2010. National Debt of Ireland: 1923–2009. Available at http://www.ntma.ie/NationalDebt/historicalData1.php. Pamuk, Sevket. 1995. Ottoman Foreign Trade in the 19th Century. Historical Statistics Series, Volume 1. Ankara: State Institute of Statistics. Reinhart, Carmen M. 2002. Default, Currency Crises, and Sovereign Credit Ratings. World Bank Economic Review 16, no. 2: 151–70. Reinhart, Carmen M., and Vincent R. Reinhart. 2009. Capital Flow Bonanzas: An Encompassing View of the Past and Present. In NBER International Seminar in Macroeconomics 2008, ed. Jeffrey Frankel and Francesco Giavazzi. Chicago: Chicago University Press for NBER. Reinhart, Carmen M., and Rogoff, Kenneth S. 2008. The Forgotten History of Domestic Debt. NBER Working Paper 13946 (April). Cambridge, MA: National Bureau of Economic Research. Reinhart, Carmen M., and Kenneth S. Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton: Princeton Press. Reinhart, Carmen M., and Kenneth S. Rogoff. 2010. From Financial Crash to Debt Crisis. NBER Working Paper 15795. Cambridge, MA: National Bureau of Economic Research. Schularick, Moritz, and Alan M. Taylor. 2009. Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008. NBER Working Paper 15512. Cambridge, MA: National Bureau of Economic Research. Soley Güell, Tomas. 1926. Historia Monetaria de Costa Rica. San Jose, Costa Rica: Imprenta Nacional. Stone, Irving. 1999. The Global Export of Capital from Great Britain, 1865–1914. New York: St. Martin’s Press. UKpublicspending. 2010. Public Spending in the United Kingdom. Available at www.ukpublicspending. co.uk. Velasco, Andres. 1987. Financial and Balance-of-Payments Crises. Journal of Development Economics 27, no. 1/2 (October: 263–83. Yousef, Tarik M. 2002. Egypt’s Growth Performance Under Economic Liberalism: A Reassessment with New GDP Estimates, 1886–1945. Review of Income and Wealth 48 (December): 561–79.

46â•‡â•‡

Figure 2.1    Algeria: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 90 80 70 60 50 40 30 20 10 0 1970

1975

1980

1985

1990

Banking crisis

1995

2000

2005

External default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.1â•…Algeria: Default, restructuring, banking crises, growth collapses, and IMF programs, 1962–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1991–96 6 n.a. 1990 n.a. 10.4 12.5 Number of episodes: 1 Â€ 0 1 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1989, 1991, 1994, 1995

5 worst output collapses, year (decline)

1961 (12.1) 1962 (21.1) 1966 (4.8) 1971 (8.5) 1980 (5.4) Total number 4

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 47

Figure 2.2    Angola: External (public plus private) debt, default, hyperinflation, and banking crises, 1975–2009 debt as a percent of GDP 700 600 500

Hyperinflation, 1993–96 (percent)

400

Year 1993 1994 1995 1996

300 200

Inflation 1,379.50 949.8 2,672.20 4,146

100 0 1975

1980 Banking crisis

1985

1990

External defaults

1995

2000

Domestic defaults

2005 Hyperinflation

Notes: No data are available prior to 1985 right after independence from Portugal (1975) and during the early years of the 27-year civil war (1975–2002). Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.2â•…Angola: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1975–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1985–2003 19 1976 1991 1993–96 54.3 60 1992–2002 Number of episodes: 1 2 1 1 Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs None

5 worst output collapses, year (decline)

1974 (5.0) 1975 (38.4) 1976 (10.2) 1992 (5.8) 1993 (24.0) Total 0

Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

48â•‡â•‡

Figure 2.3a    Argentina: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1824–2009 debt as a percent of GDP 250

200

150

Public foreign bond issues and default (millions of US dollars) 50 45 40 1827–57 35 the first and longest 30 default 25 20 15 10 5 0 1824 1834 1844 1854 1864 1874

100

50

0 1867 1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 2007 Banking crises

External defaults

Hyperinflation

.

.

Domestic defaults

Notes: Only systemic banking crises are shown above. Domestic default episodes that overlap with external default are not shaded (see table 2.3 below for dates). Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.3â•…Argentina: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1816–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1827–57 31 1890–93 1890–93 4 1982 1951 1 1989–90 1956–65 10 2001–05 1982–93 12 2007–09 1989 — 2001–05 9 Number of episodes: 7 5

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1885 1984–85 32.5 24.7 1890 1989–90 1914 1931 1934 1980 1985 1989 1995 2001 10

7 worst output collapses, year (decline)

1914 (10.4) 1917 (8.1) 1931 (6.9) 1959 (6.5) 1985 (7.0) 1989 (7.0) 2002 (10.9)

2 Â€ Â€

Memorandum item on IMF programs, 1952–2009 Dates of programs 1958–62, 1967–68, 1976–77, 1983–84, 1987, 1989, 1991–92, 1996, 1998, 2000, 2003(2)

Total 20

Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 49

Figure 2.3b Argentina: Private capital inflows from the United Kingdom, default, devaluation, and banking crises, 1865–95 capital flows as a percent of exports 160 140

1885 and 1890 crisis

120 100 80 60 40

Year

Private flows as a percent of total

1884 1885 1889 1890

42.1 96.6 78.2 100.0

Banking crisis and exit from Gold Standard, 1885

Barings banking crisis and default, 1890

20 0 1865 1867 1869 1871 1873 1875 1877 1879 1881 1883 1885 1887 1889 1891 1893 Banking crisis

External defaults

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.3c Argentina banking survey: Domestic credit, default, hyperinflation, and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 70 60 50 40 30 Currency crash; bank holiday and an output collapse of over 30 percent

20 10 1970

1975

1980

1985

First year of banking crisis

1990

1995

External defaults

2000

2005

2010

Hyperinflation

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Only systemic banking crises are shown. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009); and sources cited therein.

50â•‡â•‡

Figure 2.4a Australia: Central government (domestic plus external) debt, near-default, and banking crises, 1852–2009 debt as a percent of GDP 200 180

Near-default in 1932 in New South Wales

160 140

Household debt as a percent of GDP 130 110 90 70 50 1995 1999 2003 2007

120 100 80 60 40 20

0 1852 1862 1872 1882 1892 1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 Banking crises

Near-default

Notes: An interesting anecdote on sub-sovereign debt from correspondence with Huw McKay (who also referred us to Butlin’s work, which dates the earliest banking crises): During the Great Depression, the left-wing government of the largest state in Australia, New South Wales, voted to default on its foreign debt, only to be overruled by the federal government. Only systemic banking crises are shown. Sources: Butlin (1968); OECD; Reinhart and Rogoff (2009) and sources cited therein.

Table 2.4â•…Australia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2010 (calculations since independence—1901)

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1932 n.a. 1932 Number of episodes: 0 1

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828 n.a. n.a. 2.8 1843 1893 1931 1989 5

5 worst output collapses, year (decline)

1882 (5.6) 1892 (12.3) 1893 (5.5) 1930 (9.5) 1931 (6.7)

0 Â€ Â€

Memorandum item on IMF programs, 1952–2009 Â€ Dates of programs Total 1961 1 n.a. = not applicable Notes: Near external default (italics) not counted in total; domestic debt “forcible” conversion. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis. See also notes in figure 2.4a.

A Decade of Debtâ•‡â•‡ 51

Figure 2.4b Australia: Private capital inflows from the United Kingdom and banking crises, 1865–95 capital flows as a percent of exports 160 140 120 100 80 60

1891–93 crisis: Barings aftermath Private flows as a percent of total Year 1886 1887 1891 1892

Banking crisis

16.9 34.8 17.9 12.8

40 20 0 1865 1867 1869 1871 1873 1875 1877 1879 1881 1883 1885 1887 1889 1891 1893 Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

52â•‡â•‡

Figure 2.5a    Austria: Central government (domestic plus external) debt, default, and banking crises, 1880–2009 debt as a percent of GDP 100

Banking crisis begins in 1931 and external default in 1932 1938 was the last of 7 default episodes.

90 80 70 60

The 1921–22 hyperinflation

50 40 30 20 10

Year 1919 1920 1921

Percent share of short-term debt 68.6 87.9 99.1

0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Banking crisis

External defaults

Hyperinflation

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.5â•…Austria: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009 (Austria-Hungary pre-1918)

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1802–15 14 1945 1873 1921–22 17.1 13.3 1816 1 1924 1868–70 3 1929 1914–15 2 1931 1932–33 2 2008 1938 1 1940–52 13 Number of episodes: 7 1 5 1 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs None

4 worst output collapses, year (decline)1

1919 (15.6) 1931 (8.0) 1932 (10.3) 2009 (3.8)

Total 0

1.â•‡ Excludes World Wars I and II. Notes: There is an issue whether to treat (more or less) consecutive defaults in 1802, 1805, and 1811 as separate episodes or as a single longer episode, as above. Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 53

Figure 2.5b    Austria: Private capital inflows from the United Kingdom and banking crises, 1865–1914 capital flows as a percent of exports 450

World War I begins

400 350 300

Banking crisis

250 200 150 100 50 0 1865

1870

1875

1880

1885

1890

1895

1900

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

54â•‡â•‡

1905

1910

Figure 2.6    Belgium: Central government (domestic plus external) debt and banking crises, 1835–2009 debt as a percent of GDP 140 120 100 80 60 40 20 0 1835 1845 1855 1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 First year of banking crises Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.6â•…Belgium: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

n.a. n.a. n.a. Number of episodes: 0 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1838 n.a. n.a. 5.2 1842 1848 1870 1914 1925 1931 1934 1939 2008 10

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1952

3 worst output collapses, year (decline)1

1932 (4.5) 1938 (2.3) 2009 (3.2)

0 Â€ Â€ Total 1

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 55

Figure 2.7 Bolivia: Central government (domestic plus external) debt, default, banking crises, and hyperinflation, 1914–2009 debt as a percent of exports 1000

1931 default Percent share of short-term Year debt 1928 18.3 1929 46.2 1930 51.2

900 800 700 600 500 400

The 1931 default episode lasted 18 years

300 200 100 0 1914

1924

1934

Banking crises

1944

1954

1964

External defaults

1974

1984

Hyperinflation

1994

2004

Domestic default

Notes: No GDP data are available prior to 1950, hence we scale debt by exports. Sources: Reinhart and Rogoff (2009) and sources cited therein; UNCTAD Handbook of Statistics.

Table 2.7â•…Bolivia: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1825–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1875–79 5 1927 1987 1984–85 21.6 14.6 1931–48 18 1982–85 1994 1980–84 5 1999 1986–93 8 1989–97 9 Number of episodes: 5 2 3 1 Â€ Â€ Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1956–57, 1959, 1961–67, 1969, 1973, 1980, 1986 (2), 1988(2), 1994, 1998, 2001

56â•‡â•‡

4 worst output collapses, year (decline)

1954 (9.5) 1956 (5.9) 1982 (4.4) 1983 (4.5)

Total 20

Figure 2.8a Brazil: External debt, default, hyperinflation, and banking crises, 1824–2009 debt as a percent of exports 900

1988–94 Hyperinflation

800 700

Percent share of short-term debt

600 500

Year 1987 1988 1989

400 300 200

11.8 44.1 79.2

100

04

94

20

84

19

74

19

64

19

54

External defaults

19

44

19

34

19

24

19

14

19

04

First year of banking crises

19

94

19

84

18

74

18

64

18

54

18

44

18

34

18

18

18

24

0

Hyperinflation

Notes: For 1824–1945, public external debt; for 1946–2009 external debt is the aggregate of public and private debts. There are a total of 9 default episodes but only 8 shaded regions, as two episodes occur in consecutive years (see table 2.8). Only the major, systemic banking crises are shown. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.8â•…Brazil: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1822–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1828–34 7 1986–87 1898–01 4 1990 1902–10 9 1914–19 6 1931–33 3 1937–43 7 1961 1 1964 1 1983–90 8 Number of episodes: 9 2

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1890 1988–90 26.6 26.1 1897 1992–94 1900 or 1914 single 1923 episode 1926 1988–94 1929 1963 1985 1990 1994 11

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1958, 1961, 1965–72, 1983, 1988, 1992, 1998, 2001–02

5 worst output collapses, year (decline)

1893 (12.8) 1896 (7.2) 1930 (6.0) 1981 (4.4) 1990 (4.2)

2(1) Â€ Â€ Total 16

A Decade of Debtâ•‡â•‡ 57

Figure 2.8b Brazil: Private capital inflows from the United Kingdom and default and banking crises, 1875–1914 capital flows as a percent of exports 90 Barings crisis of 1890

80 70 60 50 40 30 20 10 0 1875

1880

1885

1890

1895

Banking crises

1900

1905

External default

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

58â•‡â•‡

1910

1915

Figure 2.9 Bulgaria: Central government (domestic plus external) debt, default, and banking crises, 1919–2009 debt as a percent of GDP 350 300 250 200 150 100 50 0 1919 Banking crises

1939 Three external defaults

1959

1979

1999

1981–90, only external public debt data available

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.9â•…Bulgaria: Default, restructuring, banking crises, growth collapses, and IMF programs, 1916–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1916–20 5 n.a. 1931 n.a. n.a. Â€ 1932 1 1994 1990–94 5 Number of episodes: 3 0 2 0 Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1991–92, 1994, 1996–98, 2002, 2004

6 worst output collapses, year (decline)

1934 (8.5) 1990 (9.1) 1991 (10.8) 1993 (11.6) 1996 (8.0) 2009 (6.5) Total number 8

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 59

Figure 2.10a Canada: Central government (domestic plus external), 1867–2009 debt as a percent of exports and GDP 700

1935: Alberta defaults

600 500 400 300 200 100 0

1867 1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 2007 First year of banking crisis

Defaults

Debt to exports

Debt to GDP

Note: The 1983 banking crisis (also shown) does not meet the systemic criteria. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.10â•…Canada: Default, restructuring, banking crises, growth collapses, and IMF programs, 1867–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1935 “near” 10 n.a. 1837 n.a. n.a. 0.7 1866 1873 1906 1908 1912 1923 1983 Number of episodes: 0 0 8 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs None

6 worst output collapses, year (decline)

1876 (6.7) 1919 (7.6) 1921 (10.8) 1931 (15.4) 1932 and 1933 (7.1)

Total 0

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

60â•‡â•‡

Figure 2.10b Canada: Private capital inflows from the United Kingdom and banking crises, 1865–1914 capital flows as a percent of exports 50 45 40 35 30 25 20 15 10 5 0 1865

Panic of 1907

1890 Barings crisis 1870

1875

1880

1885

1890

1895

1900

1905

1910

Banking crises Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 61

Figure 2.11 Central African Republic: External (public plus private) debt, default, devaluation, and banking crises, 1970–2009 debt as a percent of GDP 120 100 80 1994, a rare 100 percent devaluation across the CFA franc zone

60 40 20 0 1970

1975

1980

1985

Banking crises

1990

1995

2000

2005

Second and ongoing external default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.11â•…Central African Republic: Default, restructuring, banking crises, growth collapses, and IMF programs, 1960–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1981 1 n.a. 1976 n.a. 56 4 1983–09 27 1988 Number of episodes: 2 0 2 0 Memorandum item on IMF programs, 1952–09 Dates of programs 1980–81, 1983–85, 1987(2), 1989, 1994, 1998 n.a. = not applicable

62â•‡â•‡

4 worst output collapses, year (decline)

1979 (5.6) 1983 (6.0) 1996 (8.1) 2003 (7.1) Total 10

Figure 2.12a    Chile: Central government (domestic plus external) debt, default, and banking crises, 1826–2009 debt as a percent of GDP 200

150

100

50

0 1826

1846

1866

Banking crises

1886

1906

1926

1946

1966

1986

2006

External defaults (9 default/restructuring episodes)

Sources: Diaz, Lüder, and Wagner (2005), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.12â•…Chile: Default, banking crises, restructuring, growth collapses, and IMF programs, 1818–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–42 16 n.a. 1890 n.a. 27.1 20.3 1880–83 4 1899 1931–47 18 1907 1961 1 1915 1963 1 1926 1965 1 1976 1972 1 1981 1974–75 2 1983–90 8 Number of episodes: 9 0 7 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1956, 1958–59, 1961, 1963–66, 1968–69, 1974–75, 1983, 1985, 1989 (2)

8 worst output collapses, year (decline)

1919 (14.2) 1921 (13.3) 1930 (16.0) 1931 (21.2) 1932 (15.5) 1947 (10.8) 1975 (12.9) 1982 (13.6)

Total 16

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 63

Figure 2.12b    Chile: Total (public and private) capital inflows from the United Kingdom, default, and banking crises, 1865–1914 capital flows as a percent of exports, three-year sum 120

Barings crisis of 1890

100 80

Panic of 1907

60 40 20 0 1865

1870

1875

1880

1885

1890

Banking crises

1895

1900

1905

External default

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

64â•‡â•‡

1910

1915

Figure 2.13a China: Central government (domestic plus external) debt, default, and banking crises, 1885–1937 debt as a percent of exports 1,600 1,400 1,200 1,000 800 600 400 200 0 1885

1895

1905

Banking crisis

1915

External defaults

1925

1935

Domestic default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.13â•…China: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1850–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1921–36 16 1921 1939–49 11 1932 Number of episodes: 2 2

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1863 1946–48 12.9 10 1866 1873 1883 1898 1910 1923 1931 1934 1998 10 1

Memorandum item on IMF programs, 1952–2009 Dates of programs 1981, 1986

3 worst output collapses, year (decline)1

1934 (8.7) 1960 (3.4) 1961 (17.3)

Total 2

1.â•‡ No output data from 1939 to 1951.

A Decade of Debtâ•‡â•‡ 65

Figure 2.13b    China: Public and private capital inflows from the United Kingdom and banking crises, 1875–1914 capital flows as a percent of exports, three-year sum 70 60 50 40 30 20 10 0

1875

1880

1885

1890

1895

1900

1905

1910

1915

Banking crises Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.13c China: Central government debt issuance (domestic plus external) and banking crises, 1981–2009 three-year sum in issuance as a percent of GDP 23 21

Asian financial crisis

Total (central government) debt/GDP

19 17 15

Year 2006 2008 2009

13 11 9

Debt/ GDP 16.5 27.8 est. 35.7 est. US subprime and global crisis; fiscal stimulus plans in China

7 5 3

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 First year of banking crisis Notes: Data on central government debt outstanding (domestic plus external) are no longer published. Estimates for 2008 and 2009 are based on issuance data for those years. Sources: China Statistical Yearbook, several issues; National Debt Association of China; Reinhart and Rogoff (2009) and sources cited therein; and authors’ calculations.

66â•‡â•‡

Figure 2.14a    Colombia: Central government (domestic plus external) debt, default, and banking crises, 1902–2009 debt as a percent of GDP 90

The runup to default

80

Percent share of short-term debt 15.1 20.2 43.9

70 Year 1929 1930 1931

60 1932, the last of 7 default episodes

50 40 30 20 10

07

02

20

97

20

92

19

87

19

82

19

77

19

72

19

67

19

62

Banking crises, 1982 and 1998

19

57

19

52

19

47

19

42

19

37

19

32

19

27

19

22

19

17

19

12

19

07

19

19

19

02

0

External defaults

Sources: Junguito and Rincón (2004), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.14â•…Colombia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1819–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–45 20 n.a. 1982 n.a. 35.6 17.8 1850–61 12 1998 1873 1 1880–96 17 1900–04 5 1932–34 3 1935–44 10 Number of episodes: 7 0 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1957–60, 1962–64, 1966–73, 1999, 2003, 2005

3 worst output collapses, year (decline)

1914 (3.4) 1934 (2.1) 1999 (4.2)

Total 18

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 67

Figure 2.14b    Colombia banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 50 The 1998 banking crisis was associated with the worst recession recorded

45 40

Coverage of domestic credit series expanded

35 30 25 20 1970

1975

1980

1985

1990

1995

2000

2005

2010

First year of banking crises Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

68â•‡â•‡

Figure 2.15    Costa Rica: Central government (domestic plus external) debt default and banking crises, 1892–2009 debt as a percent of exports 750 650 550 450 350 250 150 50 1892

1902

1912

1922

1932

First year of banking crises

1942

1952

1962

1972

1982

1992

2002

6 of a total of 9 external defaults/restructurings

Notes: No GDP data are available prior to 1950; hence we scale debt by exports. Sources: Soley Güell (1926), UNCTAD Handbook of Statistics, Reinhart and Rogoff (2009) and sources cited therein.

Table 2.15â•…Costa Rica: Default, restructuring, banking crises, growth collapses, and IMF programs, 1838–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–40 13 n.a. 1987 n.a. 34.5 5.3 1874–85 12 1994 1895–97 3 1901–11 11 1932–52 21 1962 1 1981 1 1983–90 8 1984–85 Number of episodes: 9 0 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1961–62, 1965–67, 1976, 1980–82, 1985, 1987, 1989, 1991, 1993, 1995, 2009

7 worst output collapses, year (decline)

1923 (7.6) 1927 (9.2) 1932 (8.0) 1934 (11.8) 1942 (10.4) 1944 (9.4) 1982 (7.3)

Total 16

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 69

Figure 2.16    Cote D’Ivoire: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 250

200

Almost uninterrupted ongoing default for 26 years

150

100

1994, a rare 100 percent devaluation across the CFA franc zone

50

1970

1975

1980

1985

1990

Banking crisis

1995

2000

2005

External default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.16â•…Cote D’Ivoire: Default, restructuring, banking crises, growth collapses, and IMF programs, 1960–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1983–98 16 n.a. 1988 n.a. 52 6 2000–09 10 Number of episodes: 2 0 1 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1981, 1984–86, 1988–89, 1991, 1994, 1998, 2002, 2009 n.a. = not applicable

70â•‡â•‡

4 worst output collapses, year (decline)

1965 (2.2) 1983 (3.9) 1990 (6.9) 2000 (4.6) Total 11

Figure 2.17    Denmark: Central government (domestic plus external) debt, default, and banking crises, 1880–2009 debt as a percent of GDP 90

Accounting definition of debt expanded

80

Household debt as a percent of GDP

70 60

1995 2000 2005 2008

50 40

79.6 90.9 115.9 136.7

30 20 10 0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Banking crises Notes: Only systemic banking crises are shown. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.17â•…Denmark: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

n.a. n.a. 1813 Number of episodes: 0 1

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1813 n.a. 0 1.9 1857 1877 1885 1902 1907 1921 1931 1987 2008 10

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs None

5 worst output collapses, year (decline)1

1856 (5.6) 1877 (2.7) 1921 (2.9) 1932 (2.6) 2009 (5.0)

0 Total number of years 0

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 71

Figure 2.18 Dominican Republic: Central government (domestic plus external) debt, default, devaluation, and banking crises, 1914–2009 debt as a percent of GDP 100 90 80 70 60

In 1985 the 1 peso to 1 US dollar peg in place since 1905 is abandoned

50 40 30 20 10 0 1914

1924

1934

1944

1954

1964

1974

1984

1994

2004

First year of banking crises Three external defaults .. . . Default on domestic debt, 1975–2001 Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.18â•…Dominican Republic: Default, restructuring, banking crises, growth collapses, and IMF programs, 1844–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1872–88 17 1975–2001 1996 n.a. 28.3 6.6 1892–93 2 2003 1897 1 1899–1907 9 1931–34 4 1982–94 13 2005 1 Number of episodes: 7 1 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1959, 1964, 1983, 1985, 1991, 1993, 2001, 2003, 2005

3 worst output collapses, year (decline)

1965 (12.4) 1985 (2.5) 1990 (5.5)

Total 9

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

72â•‡â•‡

Figure 2.19a Ecuador: Central government (domestic plus external) debt, default and banking crises, 1914–2009 debt as a percent of GDP 140 120 100

In 2000, in the midst of crisis, Ecuador officially fully dollarized

80 60 40 20 0 1914

1924

1934

1944

Banking crises

1954

1964

1974

1984

1994

2004

External defaults (5 of a total of 10)

Notes: For the period 1973–89 the data are for external public debt for general government. This underestimates public indebtedness, as it does not include domestic (or internal) debts; at the same time general government is more inclusive than our central government measure. These two effects are working in opposite directions. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.19â•…Ecuador: Default, restructuring, banking crises, growth collapses, and IMF programs, 1830–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–45 20 1999 1981 n.a. 57.8 13.9 1868–90 4 1998 1894–98 1 1900–04 5 1906–11 3 1914–24 9 1929–54 1982–95 1999–2000 2008 Number of episodes: 10 1 2 0 Memorandum item on IMF programs, 1952–2007Â€ Dates of programs 1961–66, 1969–70, 1983, 1985–86, 1988–89, 1991, 1994, 2000, 2003

3 worst output collapses, year (decline)

1983 (2.1) 1987 (6.0) 1999 (6.3)

Total 18

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 73

Figure 2.19b Ecuador: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 160 140

Private debts become public debts—1982 default Percent share of private debt

120 100 80 60

1999 banking crisis and default Ecuador dollarizes

Year 1972–1981 1982 1983–1992

18.2 21.1 2.2

40 20 0 1970

1975

1980

1985 Banking crises

1990

1995

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

74â•‡â•‡

2000

2005

Figure 2.20 Egypt: Public debt, default, and banking crises, 1862–2009 debt as a percent of GDP 350 300 250 200 150 100

1876, the first of 2 default episodes

50

No external public debts, 1940–60

0 1862 1872 1882 1892 1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 Banking crises

External defaults

Notes: By 1945, the outstanding balance on Ottoman debts were either fully paid off or forgiven; no external debts are recorded through 1960. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.20â•…Egypt: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1876–80 5 n.a. 1907 n.a. 2.9 5.2 1984 1 1981 Number of episodes: 1990 2 0 3 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1962, 1964, 1977–78, 1987, 1991, 1993, 1996

5 worst output collapses, year (decline)

1887 (2.2) 1914 (3.0) 1920 (6.6) 1942 (3.6) 1991 (3.2) Total 8

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis. Sources: Pre-World War II GDP from Yousef (2002).

A Decade of Debtâ•‡â•‡ 75

Figure 2.21a El Salvador: Central government (domestic plus external) debt, default and banking crises, 1914–2009 debt as a percent of GDP 70 60 50 40 30 20 10

33 19 37 19 41 19 45 19 49 19 53 19 57 19 61 19 65 19 69 19 73 19 77 19 81 19 85 19 89 19 93 19 97 20 01 20 05 20 09

29

19

25

19

21

19

19

19

17

0

First year of banking crisis

External default episodes

.. .

Domestic defaults

Notes: No GDP data are available prior to 1950; hence, we scale debt by exports. Sources: Reinhart and Rogoff (2009), and sources cited therein; UNCTAD Handbook of Statistics.

Table 2.21â•…El Salvador: Default, restructuring, banking crises, growth collapses, and IMF programs, 1838–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–60 33 1981–96 1989 n.a. 22.7 3.5 1898 1 1921–22 3 1932–35 11 1938–46 21 Number of episodes: 5 1 1 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1958–63, 1965, 1967, 1969–70, 1972, 1980, 1982, 1990, 1992–93, 1995, 1997–98, 2009 n.a. = not applicable

76â•‡â•‡

7 worst output collapses, year (decline)

1927 (12.1) 1931 (10.1) 1932 (10.2) 1938 (7.1) 1949 (9.2) 1980 (8.6) 1982 (6.3) Total 20

Figure 2.21b El Salvador: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 60 50 40 30

Private debts become public debts—1981 domestic default Percent share of Year private debt 40.7 1971–80 5.8 1981–90 27 2007

In 2001, El Salvador dollarizes

20 10

As an exception to the rule, El Salvador defaulted on its domestic debts in 1981 while servicing external debts

0 1970

1975

1980

1985 Banking crisis

1990

1995

2000

2005

Domestic default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 77

Figure 2.22a Finland: Central government (domestic plus external) debt and banking crises, 1914–2009 debt as a percent of GDP 120 100 80 60 40 20 0 1914

1924

1934

1944

1954

1964

1974

1984

1994

2004

First year of banking crisis Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.22â•…Finland: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

n.a. n.a. n.a. Number of episodes: 0 0

Share of years in inflation crisis

1900 n.a. n.a. 7.5 1921 1931 1939 1991 5

Memorandum item on IMF programs, 1952–2009 Dates of programs 1952, 1967, 1975 n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Note: Summary of private forecasts for 2009 in italics.

78â•‡â•‡

Hyperinflation dates

Share of years in external default

5 worst output collapses, year (decline)1

1862 (5.4) 1867 (8.0) 1931 (2.4) 1991 (6.2) 2009 (6.4)

0 Total 3

Figure 2.22b Finland banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 100

In 1992, the markka “crashed” during the Exchange Rate Mechanism crisis

90 80 70 60 50

1991, the first year of the banking crisis

40 30 1970

1975

1980

1985

1990

1995

2000

2005

2010

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 79

Figure 2.23    France: Central government (domestic plus external) debt and banking crises, 1880–2009 debt as a percent of GDP 300 Year 1815 1848 1870 1873

250 200

Debt/GDP 17.2 45.8 53.4 89.6

150 100 50 0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Banking crises Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.23â•…France: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1812 n.a. n.a. Number of episodes: 1 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1802 n.a. 0.5 5.7 1805 1848 1881 1889 1907 1914 1930 1994

Memorandum item on IMF programs, 1952–2009 Dates of programs 1956, 1958, 1969

9

6 worst output collapses, year (decline)1

1848 (6.1) 1859 (6.5) 1870 (7.6) 1876 (8.2) 1931 (6.0) 1932 (6.5)

0 Total 3

n.a. = not applicable 1.â•‡Excludes World Wars I and II. There are a couple of additional output declines comparable in magnitude to those shown in the latter 19th century. Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

80â•‡â•‡

Figure 2.24a Germany: Federal and total government (domestic plus external) debt, default, hyperinflation, and banking crises, 1880–2009 debt as a percent of GDP 90

The march to hyperinflation Percent share of Year short-term debt 24.1 1916 31.7 1918 51.7 1920 77.7 1922 99.6 1923

80 70 60 50 40 30 20

Depressionwartime default

10 0 1880

1890

1900

1910

Banking crises

1920

1930

1940

1950

External default Total public debt

1960

1970

1980

1990

2000

2010

Hyperinflation, 1923–24 Federal debt

Notes: Only systemic banking crises are shown. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.24â•…Germany: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1807 1 1948 1812 1 1850 1 1932–53 22 Number of episodes: 4 1

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1857 1923–24 12.9 9.5 1880 1891 1901 1925 1931 1977 2007

Memorandum item on IMF programs, 1952–2009 Dates of programs None

8

6 worst output collapses, year (decline)1

1919 (19.5) 1923 (16.9) 1931 (7.6) 1932 (7.5) 1946 (52.6) 2009 (4.9)

1 Total 0

1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 81

Figure 2.24b Germany: Public and private capital inflows from the United Kingdom and banking crises, 1870–1912 capital flows as a percent of exports, three-year sum 400 350 300 250 200 150 100 50 0 1870

1875

1880

1885

1890

1895

1900

Banking crises Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

82â•‡â•‡

1905

1910

Figure 2.25    Ghana: Total public (domestic and external) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 1971–2003, frequent currency crashes and high inflation

150 130 110 90 70 50 1957 Independence

30 10 1952

1957

1962

1967

1972

First year of banking crisis

1977

1982

1987

External default

1992 ..

1997

2002

2007

Domestic default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.25â•… Ghana: Default, restructuring, banking crises, growth collapses, and IMF programs, 1957–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1966 1 1979 1982 n.a. 9.4 45.3 1968 1 1982 1997 1970 1 1974 1 1987 1 Number of episodes: 5 2 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1966–69, 1979, 1983, 1984, 1986, 1987(2), 1988, 1995, 1999, 2003

4 worst output collapses, year (decline)

1955 (6.4) 1975 (12.5) 1982 (6.9) 1983 (4.6)

Total 14

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 83

Figure 2.26a    Greece: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1848–2009 debt as a percent of GDP

450

Household debt as a percent of GDP

400

1995 2000 2005 2008

350 300 250

6 12.9 35.9 49.7

200 150 100 50 0 1848 1858 1868 1878 1888 1898 1908 1918 1928 1938 1948 1958 1968 1978 1988 1998 2008 Banking crisis

External defaults

Hyperinflation, 1941–44

Near-default, 2010

Sources: Lazaretou (2005), Levandis (1944), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.26â•…Greece: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1829–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–42 17 1932–51 1931 1941–44 48.1 12.7 1843–59 17 1991 1860–78 19 1894–97 4 1932–64 33 Number of episodes: 5 1 2 1 Memorandum item on IMF programs, 1952–2007Â€ Dates of programs None

5 worst output collapses, year (decline)1

1847 (14.0) 1852 (14.7) 1856 (11.7) 1891 (11.5) 1919 (17.7)

Total 0

1.â•‡ Excludes World Wars I and II. Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis. Source: Kostelenos et al. (2007).

84â•‡â•‡

Figure 2.26b Greece: Government domestic debt, default, and banking crises, 1884–1939 loans to the government as a percent of central bank loans 60 50 40 30

Rising domestic debt on the eve of external default

20 10 0 1848

1858

1868

1878

1888

Banking crisis

1898

1908

1918

1928

1938

External defaults

Sources: Lazaretou (2005), Levandis (1944), Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 85

Figure 2.27    Guatemala: Central government (domestic plus external) debt, default, and devaluation, 1920–2009 debt as a percent of GDP 70 60 50 The 1-to-1 peg in place since 1900 ends in 1985

40 30 20 10 0

1920 1927 1934 1941 1948 1955 1962 1969 1976 1983 1990 1997 2004 Banking crisis

External default episodes

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.27â•…Guatemala: Default, restructuring, banking crises, growth collapses, and IMF programs, 1838–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–56 29 n.a. 1991 n.a. 31.4 3.5 1876–88 13 2001 1894 1 2006 1899–1913 14 1933–36 4 1986 1 1989 1 Number of episodes: 7 0 3 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1960–61, 1966–70, 1972, 1981, 1983, 1988, 1992, 2002–03, 2009

5 worst output collapses, year (decline)

1922 (5.6) 1931 (6.7) 1932 (12.5) 1943 (33.3) 1982 (3.5)

Total 15

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

86â•‡â•‡

Figure 2.28    Honduras: Central government (domestic plus external) debt, default, and devaluation, 1914–2009 debt as a percent of GDP 250 200 150 Honduras has not had a systemic banking crisis in this period

100 50

The 2-to-1 peg in place since 1919 ends in 1981 0 1920 1927 1934 1941 1948 1955 1962 1969 1976 1983 1990 1997 2004 External default episodes Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.28â•…Honduras: Default, restructuring, banking crises, growth collapses, and IMF programs, 1838–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–67 40 n.a. 1999 n.a. 65.1 3.5 1873–1925 53 2001 1981–2009 29 Number of episodes: 3 0 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1957, 1959–64, 1966, 1968–69, 1971–72, 1979, 1982, 1990, 1992, 1999, 2004, 2008

5 worst output collapses, year (decline)

1924 (6.6) 1932 (10.4) 1933 (6.2) 1942 (8.6) 1954 (5.7) Total 19

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 87

Figure 2.29 Hungary: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1880–2009 debt as a percent of GDP 200

Wartime 1941 default lasts nearly 3 decades

180 160 140 120 100 80 60 40 20 0

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 First year of banking crises

External defaults

Hyperinflation, 1945–46

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.29â•…Hungary: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1918–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1932–37 7 n.a. 1931 1945–46 37 14.1 1941–67 27 1991 2008 Number of episodes: 2 0 3 1 Memorandum item on IMF programs, 1952–2009 Dates of programs 1982, 1984, 1988, 1990–91, 1993, 1996, 2008 n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

88â•‡â•‡

4 worst output collapses, year (decline)

1931 (4.8) 1990 (6.7) 1991 (11.9) 2009 (6.7)

Total 8

Figure 2.30a    Iceland: Central government (domestic plus external) debt and banking crises, 1908–2009 debt as a percent of GDP 80 70 60 50 40 30 20

Banking crisis, currency crash, and near-default, 2007–present

10

19

08 19 13 19 18 19 23 19 28 19 33 19 38 19 43 19 48 19 53 19 58 19 63 19 68 19 73 19 78 19 83 19 88 19 93 19 98 20 03 20 08

0

First year of banking crisis

Near-default, 2007–present

Sources: Historical Statistics of Iceland, 2010; Reinhart and Rogoff (2009) and sources cited therein.

Table 2.30â•…Iceland: Default, restructuring, banking crises, growth collapses, and IMF programs, 1918–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. n.a. 1985 n.a. n.a. 25 2007–10 “near” 3 2007 Number of episodes: 0 0 2 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1960, 2008

5 worst output collapses, year (decline)1

1916 (11.7) 1918 (6.2) 1920 (15.2) 1968 (5.6) 2009 (8.5) Total 2

n.a. = not applicable 1.â•‡ The reported declines for 1916, 1918, and 1920 are on a per capita basis (Historical Statistics of Iceland, 2010). Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 89

Figure 2.30b    Iceland: External (public plus private) debt and banking crises, 1922–2009 debt as a percent of GDP 150 130

Year 2005 2006 2007 2009 2010 Q1

110 90 70

Percent External share of shortdebt/GDP term debt 276.4 428.3 512.8 1,002.7 914.8

Banking crisis, currency crash, near-default, 2007–present

16.5 17.5 37.5 46.2 49.5

50 30 10

47 19 52 19 57 19 62 19 67 19 72 19 77 19 82 19 87 19 92 19 97 20 02 20 07

42

19

37

19

32

19

27

19

19

19

22

–10

First year of banking crisis

Near-default, 2007–present

Sources: Historical Statistics of Iceland, 2010; Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.30c    Iceland banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 420

The exchange rate crashed by about 95 percent against the dollar in 2008

370 320 270 220 170 120 70 20 1970

1980

1990

First year of banking crisis

2000

2010

Near-default

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

90â•‡â•‡

Figure 2.31    India: Public (domestic plus external) debt reschedulings, near-default, and banking crises, 1835–2009 debt as a percent of exports 1,400 1,200 1,000 800 600 400 200

05

95

20

85

19

75

19

65

19

55

External debt restructuring

19

45

19

35

19

25

19

15

19

05

19

95

First year of banking crisis

19

85

18

75

18

65

18

55

18

45

18

18

18

35

0

Near-default, 1990–91

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.31â•…India: Default, restructuring, banking crises, growth collapses, and IMF programs, 1835–2009 (calculations since independence— 1947, reported)

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1958 1 n.a. 1969 1 1972–76 5 1989–90 Number of episodes: 3 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1863 n.a. 11.1 3.2 1908 1914 1921 1929 1947 1993 7 0

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1957, 1962–63, 1965, 1981, 1991 (2)

5 worst output collapses, year (decline)

1891 (9.2) 1899 (7.8) 1918 (12.8) 1920 (7.9) 1947 (17.2)

Total 7

n.a. = not applicable Notes: Near-default (italics) not counted in total.

A Decade of Debtâ•‡â•‡ 91

Figure 2.32a Indonesia: Central government (domestic plus external) debt, default, and banking crises, 1911–2009 debt as a percent of GDP 100

“Hidden debts” on the eve of Asian crisis

90

1966, the Year of Living Dangerously, inflation hits 940 percent

30 20 10

3 external default/restructuring episodes

01 20 06

96

20

91

19

86

19

81

19

76

19

71

19

66

19

51

46

19

41

19

36

Banking crises

19

19

26

19

21

19

16

19

11

19

19

31

1949, Independence

0

61

40

19

50

56

60

Share of private Years debt 1985–94 14.2 1995 26.6 1997 34.8

19

70

19

80

Hyperinflation

Sources: Creutzberg (1976), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.32â•…Indonesia: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009 (calculations since independence—1949, reported)

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1966–70 5 n.a. 1992 1966 14.8 31.1 1998–2000 3 1997 2002 1 Number of episodes: 3 0 2 1 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1961, 1963, 1968–73, 1997–98, 2000 n.a. = not applicable

92â•‡â•‡

5 worst output collapses, year (decline)

1931 (7.1) 1958 (4.7) 1963 (4.2) 1967 (4.4) 1998 (13.1)

Total 11

Figure 2.32b Indonesia banking survey: Domestic credit, default and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 90

During 1997–98, the exchange rate collapsed by about 235 percent against the dollar; inflation spiked to 60 percent

80 70 60 50 40

The “twin crises” was followed by defaults

30 20 10 0

1970

1975

1980

1985

1990

First year of banking crisis

1995

2000

2005

2010

External default

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 93

Figure 2.33a Ireland: Central government (domestic plus external) debt and banking crises, 1929–2009 debt as a percent of GDP 120

Household debt as a percent of GDP

100

100

First year of banking crisis

80 60

80

40 2000

2002

2004

2006

2008

60 40 20 0 1924

1934

1944

1954

1964

1974

1984

1994

2004

Sources: National Treasury Management Agency (2010); Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.33â•…Ireland: Default, restructuring, banking crises, growth collapses, and IMF programs, 1919–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. 1836 n.a. n.a. 1856 2007 Number of episodes: 0 0 3 0 Memorandum item on IMF programs, 1952–2009 Dates of programs None n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

94â•‡â•‡

5 worst output collapses, year (decline)

1933 (2.5) 1937 (3.8) 1958 (2.1) 2008 (3.0) 2009 (7.5)

Total 0

Figure 2.33b Ireland banking survey: Domestic credit and banking crises, 1970–2010Q2 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 300 First year of the banking crisis

250 200 150 100 50 0 1970

1975

1980

1985

1990

1995

2000

2005

2010

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 95

Figure 2.34 Italy: Central government (domestic plus external) debt, default, and banking crises, 1861–2009 debt as a percent of GDP 180 160 140 120 100 80 60 40 20 0 1861 1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 First year of banking crisis

Wartime default

Sources: Francese and Pace (2008), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.34â•…Italy: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1940–46 7 n.a. Number of episodes: 1 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1866 1944 3.3 10.5 1887 1891 1893 1907 1914 1921 1930 1935 1990 2008 11

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1974, 1977

7 worst output collapses, year (decline)

1867 (8.3) 1881 (6.7) 1892 (5.6) 1919 (16.7) 1920 (8.7) 1930 (4.9) 2009 (4.8)

0 Total 2

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

96â•‡â•‡

Figure 2.35a Japan: Central government (domestic plus external) debt, default, and banking crises, 1885–2009 debt as a percent of GDP 200 180 160 140 120 100

1992 banking crisis ushers in lost decade

80 60 40 20 0

1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 First year banking crisis

Wartime default, 1942 (lasts a decade)

Hyperinflation, 1945

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.35â•…Japan: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1942–52 11 1946–48 Number of episodes: 1 1

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1872 1945 5.2 11 1882 1901 1907 1917 1923 1927 1992 8

Memorandum item on IMF programs, 1952–2009 Dates of programs 1962, 1964

5 worst output collapses, year (decline)

1896 (5.5) 1899 (7.4) 1920 (6.2) 1930 (7.3) 2009 (5.0)

1 Â€ Â€ Total 2

Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 97

Figure 2.35b Japan banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 330 310 290

Spring and fall 2000 burst of IT bubble

270 250 230 210 190 First year of the banking crisis

170 150 130 1970

1975

1980

1985

1990

1995

2000

2005

Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

98â•‡â•‡

Figure 2.36 Kenya: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 140 120 100 80 60 40 20 0 1970

1975

1980

1985

1990

Banking crises

1995

2000

2005

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.36â•…Kenya: Default, restructuring, banking crises, growth collapses, and IMF programs, 1963–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1994–98 5 n.a. 1985 n.a. 14.9 8.5 2000–01 2 1996 Number of episodes: 2 0 2 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1975, 1977–80, 1982–83, 1985, 1988(2), 1989, 1993, 1996, 2000, 2003

3 worst output collapses, year (decline)1

1952 (11.1) 1953 (2.5) 1961 (2.4)

Total 15

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 99

Figure 2.37a Korea: External (public plus private) debt, near-default, and banking crises, 1970–2009 debt as a percent of GDP 60

“Hidden debts” on the eve of Asian crisis Share of private debt Year

50 40 30 20 10

1985–94 1995 1997

Private external debt as a percent of GDP 20 1997–98 banking crisis 15 10 5 0 1990 1992 1994 1996 1998

18 19.9 30.4

0 1970

1975

1980

1985

1990

Banking crises

1995

2000

2005

Near-default/bailout episode, 1998

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.37â•…Korea: Default, restructuring, banking crises, growth collapses, and IMF programs, 1945–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1997–98 2 1983 n.a. 0 15.4 1985 1997 Number of episodes: 0 0 3 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1965–75, 1977, 1980–81, 1983, 1985, 1997 n.a. = not applicable Notes: Near default (italics) not counted in total. Sources: Pre-World War II real GDP: Bassino and van del Eng (2006).

100â•‡â•‡

5 worst output collapses, year (decline)

1920 (12.3) 1922 (7.1) 1939 (10.4) 1951 (7.7) 1998 (6.9)

Total 17

Figure 2.37b Korea banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP 120 The 1997–98 Asian crisis

110 100 90 80 70 60 50 40 30 1970

1975

1980

1985

1990

First year of banking crises

1995

2000

2005

2010

Near-default

Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 101

Figure 2.38a Malaysia: External (public plus private) debt, near-default, and banking crises, 1970–2009 debt as a percent of GDP 80 70 60 50 40

“Hidden debts” on the eve of Asian crisis Share of private debt Year 1985–94 1995 1997

15.9 32 32.8

30 20 10 0 1970

1974

1978

Banking crises

1982

1986

1990

1994

Public external debt

1998

2002

2006

Private external debt

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.38â•…Malaysia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1963–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. n.a. 1985 n.a. 0 0 1997 Number of episodes: 0 0 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs None n.a. = not applicable Sources: Pre-World War II real GDP: Bassino and van del Eng (2006).

102â•‡â•‡

5 worst output collapses, year (decline)

1912 (7.2) 1925 (12.4) 1938 (4.9) 1951 (5.5) 1998 (7.4) Total 0

Figure 2.38b Malaysia banking survey: Domestic credit, default and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 160 140 120 100 80 60 40 20 1970

1975

1980

First year of banking crises

1985

1990

1995

2000

2005

Domestic credit aggregate expanded coverage

Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 103

Figure 2.39    Mauritius: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 70

1997 banking crisis

60 50 40 30

Share of private debt 8 16.3 13.5 6.4

Years 1982–1991 1992–1996 1997 1998–2002

20 10 0 1970

1975

1980

1985

1990

1995

2000

2005

Banking crisis, 1997 Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.39â•…Mauritius: Default, restructuring, banking crises, growth collapses, and IMF programs, 1968–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. n.a. 1997 n.a. 0 11.9 Number of episodes: 0 0 1 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1978–81, 1983, 1985

3 worst output collapses, year (decline)

1964 (6.9) 1968 (6.9) 1980 (10.1)

Total 6

n.a. = not applicable Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

104â•‡â•‡

Figure 2.40a    Mexico: Public foreign bond issues, default, and banking crises, 1824–1914 billions of US dollars, three-year sum 180 160 140 120 100 80 60 40 20 0 1823

1833

1843

1853

1863

1873

Banking crises, 1883, 1907, & 1913

1883

1893

1903

1913

The first 6 of 8 default episodes

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.40â•…Mexico: Default, restructuring, banking crises, growth collapses, and IMF programs, 1821–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–30 3 1850 1883 n.a. 43.9 11.1 1833–41 1 1928–32 1907 1844–50 7 1982 1913 1854–64 11 1920 1866–85 20 1929 1914–22 9 1981 1928–42 15 1994 1982–90 9 1994–95 Number of episodes: 8 3 7 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1954, 1959, 1961, 1977, 1983, 1986, 1989, 1995, 1999

6 worst output collapses, year (decline)

1902 (7.1) 1930 (6.3) 1932 (15.0) 1983 (4.3) 1995 (6.2) 2009 (6.7)

Total 9

n.a. = not applicable Notes: Near defaults (not counted in total) are in italics. Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 105

02--Chapter 2.2--105-152.indd 105

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Figure 2.40b Mexico: Central government (domestic plus external) debt, default, and banking crises, 1872–2009 debt as a percent of GDP 500 1994–95 near-default Tesobonos crisis Share of short-term debt Year 43.7 1992 58.6 1993 72.8 1994

450 400 350 300 250 200 150 100

1982, last of 8 default episodes

50 0

1872 1882 1892 1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 Banking crises

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

106â•‡â•‡

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Figure 2.41 Morocco: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 120 Morocco’s first default was 1903–04

1983 was a default and a banking crisis

100 80 60 40 20 0 1970

1975

1980

1985

1990

Banking crisis

1995

2000

2005

External default

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.41â•…Morocco: Default, restructuring, banking crises, growth collapses, and IMF programs, 1956–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1903–04 2 n.a. 1983 n.a. 11.1 0 1983 1 1986–90 5 Number of episodes: 3 0 1 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1959, 1965–69, 1971, 1980–83, 1985–86, 1988, 1990, 1992

3 worst output collapses, year (decline)

1981 (2.8) 1992 (4.0) 1995 (6.6)

Total 16

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 107

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Figure 2.42 Myanmar: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 250 Single external default episode

200

150

100

50

Banking crisis

0 1970

1975

1980

1985

1990

1995

2000

2005

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.42â•…Myanmar: Default, restructuring, banking crises, growth collapses, and IMF programs, 1948–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1997–2009 13 1984 1996 n.a. 21 37.1 1987 Number of episodes: 1 2 4 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1969, 1973–74, 1977–78, 1981

4 worst output collapses, year (decline)

1954 (6.2) 1966 (4.2) 1987 (4.0) 1988 (11.4)

Total 6

n.a. = not applicable

108â•‡â•‡

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Figure 2.43    Netherlands: General government (domestic plus external) and banking crises, 1812–2009 debt as a percent of GDP

130 110 90 70 50

300 250

Household debt as a percent of GDP

1995 1997 1999 2001 2003 2005 2007 2009

200 150 100

End of French rule and wartime default

50

22 19 32 19 42 19 52 19 62 19 72 19 82 19 92 20 02

12

19

02

19

92

19

82

18

72

18

62

18

52

18

42

18

32

18

22

18

18

18

12

0

First year of banking crisis Sources: Bos (2007), Reinhart and Rogoff (2009), and sources cited therein.

Table 2.43â•…Netherlands: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1802–14 13 1802–14 Number of episodes: 1 1

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1819 n.a. 6.2 0 1897 1914 1921 1939 2008 6

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1957

4 worst output collapses, year (decline)1

1830 (3.5) 1896 (3.8) 1931 (6.1) 2009 (4.0)

0 Total 1

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 109

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Figure 2.44a    New Zealand: Central government (domestic plus external) debt and banking crises, 1860–2009 debt as a percent of GDP Between 1914 and 1929 the share of domestic debt rose from less than 20 percent to about 50 percent

250

Household debt as a percent of GDP 110 90 70 50 1995 1999 2003 2007

200

150

100

50

The 1892–93 crisis was common to Australia and New Zealand

0 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 First year of banking crisis Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.44â•…New Zealand: Default, restructuring, banking crises, growth collapses, and IMF programs, 1907–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. n.a. 1893 Â€ 0 0 1987 Number of episodes: 0 0 2 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1967

5 worst output collapses, year (decline)1

1876 (11.6) 1908 (6.9) 1931 (8.5) 1948 (9.9) 1951 (7.6)

Total 1

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

110â•‡â•‡

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Figure 2.44b    New Zealand: Private capital inflows from the United Kingdom and banking crises, 1865–1905 capital flows as a percent of exports 140

1891–93 crisis: Barings aftermath

120

Banking crisis

Private flows as a percent of total Year 1886 16.9 1887 34.8 1891 17.9 1892 12.8

100 80 60 40 20

05

03

19

01

19

99

19

97

18

95

18

93

18

91

18

89

18

87

18

85

18

83

18

81

18

79

18

77

18

75

18

73

18

71

18

69

18

67

18

18

18

65

0

Sources: Stone (1999), Reinhart and Rogoff (2009), and sources cited therein.

A Decade of Debtâ•‡â•‡ 111

02--Chapter 2.2--105-152.indd 111

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Figure 2.45 Nicaragua: Central government (domestic plus external) debt and default, hyperinflation, and banking crises, 1914–2009 debt as a percent of exports 4,500 4,000 3,500 3,000

Runup to 1932 default Year

Share of shortterm debt

1925 1927 1929 1931

8.8 60.6 89.6 93.3

1985–90 Hyperinflation Year 1985 1986 1987 1988 1989 1990

2,500 2,000 1,500 1,000 500

Peak debt-to-exports is 524 percent in 1932

0 1914

1924

1934

First year of banking crisis

Percent 571.4 885.2 13,109.5 4,775.2 7,428.7 3,004.1

There is no private domestic or external debt; the domestic public debt market disappears (no data 1950s–60s) 1944

Banking crisis

1954

1964

1974

External defaults

1984

1994

2004

Hyperinflation

Notes: No GDP data are available prior to 1950; hence we scale debt by exports. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.45â•…Nicaragua: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1838–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828–74 47 1985–90 1987 1985–90 47.1 12.2 1894–95 2 2000 1911–12 2 1915–17 3 1932–37 6 1979–2009 31 Number of episodes: 6 1 2 1 Memorandum item on IMF programs, 1952–2009 Dates of programs 1956–58, 1960, 1963–64, 1968–70, 1972, 1979, 1991, 1994, 1998, 2002

5 worst output collapses, year (decline)

1930 (19.2) 1936 (20.4) 1978 (7.9) 1979 (26.6) 1988 (12.4)

Total 15

Note: Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

112â•‡â•‡

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Figure 2.46    Nigeria: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 250

200

150

Fleeting default on an oil warrant

2004–05 was the last of 5 external default episodes

100

50

0 1970

1975

1980

1985

1990

Banking crisis

1995

2000

2005

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.46â•…Nigeria: Default, restructuring, banking crises, growth collapses, and IMF programs, 1960–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1982–92 11 n.a. 1992 n.a. 28 24 1986–88 3 1995 1992 1 2001 1 2004–05 2 Number of episodes: 5 0 2 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1987, 1989, 1991, 2000

5 worst output collapses, year (decline)

1967 (15.5) 1978 (5.9) 1983 (5.1) 1986 (8.8) 1987 (10.8)

Total 4

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 113

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Figure 2.47a Norway: Central government (domestic plus external) debt and banking crises, 1880–2009 debt as a percent of GDP

70 60 50 40 30 20 10 0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 First year of banking crisis Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.47â•…Norway: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

n.a. n.a. n.a. Number of episodes: 0 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1898 n.a. n.a. 5.2 1921 1931 1936 1987

Memorandum item on IMF programs, 1952–2009 Dates of programs None

5

4 worst output collapses, year (decline)

1831 (7.0) 1848 (4.7) 1921 (9.7) 1931 (7.8)

0 Total 0

n.a. = not applicable

114â•‡â•‡

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Figure 2.47b Norway: Domestic private credit, 1900–2004 amount outstanding at year-end as a percent of GDP 180 160 140 120 100 80 60

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

First year of banking crises Sources: Eitrheim, Gerdrup, and Klovland (2004), Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 115

02--Chapter 2.2--105-152.indd 115

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Figure 2.48 Panama: Central government (domestic plus external) debt and banking crises, 1914–2009 debt as a percent of GDP 120

1988–89 US trade sanctions; freezing of assets in the US; bank runs and bank holiday

100 80 60

There were no external debts

40 20

Banking crisis

04 20 09

99

20

94

19

89

19

84

19

79

19

74

External default episodes

19

69

19

64

19

59

19

54

19

49

19

44

19

39

19

34

19

29

19

24

19

19

19

19

19

14

0

Defaults on domestic debts

Notes: No GDP data are available prior to 1945; hence, we scale debt by exports and adjust it by the ratio of exports to GDP to splice the pre–World War II series. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.48â•…Panama: Default, restructuring, banking crises, growth collapses, and IMF programs, 1903–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1932–46 15 88–89 1988 n.a. 27.1 0 1983–96 14 1987–94 Number of episodes: 3 1 1 0 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1965, 1968–75, 1977–80, 1982–83, 1985, 1992, 1995, 1997, 2000

3 worst output collapses, year (decline)

1948 (5.9) 1983 (4.5) 1988 (13.5)

Total 20

n.a. = not applicable Notes: The 1987–94 default was on bonds, while the 1983–96 episode was on bank loans.

116â•‡â•‡

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Figure 2.49    Paraguay: External (public plus private) debt, near-default, and banking crises, 1970–2009 debt as a percent of GDP 80

2002 banking crisis; 2003 7th default episode

70 60 50 40 30 20 10 0 1970

1975

1980

1985

1990

Banking crises

1995

2000

2005

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.49â•…Paraguay: Default, restructuring, banking crises, growth collapses, and IMF programs, 1811–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1874–85 12 n.a. 1890 n.a. 22.6 11.1 1892–95 4 1997 1920–24 5 2002 1932–44 13 1968–69 2 1986–92 7 2003–04 2 Number of episodes: 7 0 3 0 Â€ Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1957–61, 1964, 1966, 1968–69, 2003

4 worst output collapses, year (decline)

1940 (5.3) 1947 (13.1) 1983 (3.0) 2009 (4.5)

Total 10

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 117

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Figure 2.50a Peru: Central government (domestic plus external) debt, default, and banking crises, 1917–2009 debt as a percent of GDP 100

1983, last of 8 default episodes

90 80 70 60 50 40 30 20 10 0 1917

1927

1937

1947

Banking crises

1957

1967

External defaults

1977

1987

1997

2007

Hyperinflation, 1988–90

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.50â•…Peru: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1821–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–48 23 1931–38 1872 1988–90 40.2 13.2 1876–89 14 1985–87 1983 1931–51 21 1999 1969–69 2 1976 1 1978 1 1980 1 1984–97 14 Number of episodes: 8 2 3 1 Memorandum item on IMF programs, 1952–2009 Dates of programs 1954, 1958–68, 1970, 1977–79, 1982, 1984, 1993, 1996, 1999, 2001–02, 2004

5 worst output collapses, year (decline)

1930 (11.5) 1931 (8.1) 1983 (9.3) 1988 (9.4) 1989 (13.4)

Total number of years 24

118â•‡â•‡

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Figure 2.50b Peru: Total (public and private) capital inflows from the United Kingdom and banking crises, 1865–1905 capital flows as a percent of exports 1,400 1,200

Banking crisis

1,000 External default

800 600 400 200 0 1865

1870

1875

1880

1885

1890

1895

1900

1905

1910

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 119

02--Chapter 2.2--105-152.indd 119

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Figure 2.51a Philippines: External private and public (domestic plus external) debt, near-default, and banking crises, 1948–2009 debt as a percent of GDP 90

1983–92 is the single default episode

80 70 60 50 40 30 20 10 0 1948

1958

1968

Banking crises

1978

1988

External default

1998

2008

Private external debt

Domestic plus external public debt Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.51â•…Philippines: Default, restructuring, banking crises, growth collapses, and IMF programs, 1946–2009

External default/ restructuring

Banking crisis Domestic Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1983–92 10 n.a. 1981 n.a. 18.8 6.3 1997 Number of episodes: 1 0 2 0 Memorandum item on IMF programs, 1952–2007 Dates of programs 1962–68, 1970–76, 1979–80, 1983–84, 1986, 1989, 1991, 1994, 1998

5 worst output collapses, year (decline)

1904 (13.9) 1923 (6.1) 1935 (6.8) 1984 (7.5) 1985 (7.5)

Total 23

n.a. = not applicable Sources: Pre-World War II real GDP: Bassino and van del Eng (2006).

120â•‡â•‡

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Figure 2.51b Philippines banking survey: Domestic credit, default, and banking crises, 1980–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 90 80 70 60 50 40 30 20 10 1984

1989

1994

1999

2004

2008

First year of banking crises, 1981 and 1997 Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 121

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Figure 2.52a    Poland: Central government (domestic plus external) debt, default, hyperinflation, and banking crises, 1917–47 debt as a percent of GDP 700 1919–23 Hyperinflation

600

Year 1919 1920 1921 1922 1923

500 400

Total debt

Share of short-term debt

9,988 70,741 252,705 744,836 111,509,994

77.1 87.5 94.0 97.3 100.0

300 200 100 0 1917

1922

First year of banking crises

1927

1932

1937

Hyperinflation, 1919–23

1942

1947

Depression and wartime defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.52â•…Poland: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1918–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1936–37 2 n.a. 1931 1919–23 31.5 18.5 1940–52 13 1934 1990 1981–94 14 1991 Number of episodes: 3 0 3 1 Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1990–91, 1993–94

4 worst output collapses, year (decline)

1980 (–6.0) 1981 (10.0) 1990 (7.2) 1991 (7.0)

Total number of years 4

n.a. = not applicable

122â•‡â•‡

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Figure 2.52b Poland: Central government (domestic plus external) debt, default, hyperinflation and banking crises, 1984–2009 debt as a percent of GDP 90 Hidden debts? 80 Year 1992 1996 1998 2007

70 60 50

Share of private debts 0.8 3.7 25 46.8

40 30 20 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Banking crisis

Last of 3 external defaults

Hyperinflation, 1990

Sources: Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 123

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Figure 2.53 Portugal: Central government (domestic plus external) debt, default, and banking crises, 1851–2009 debt as a percent of GDP 100

Household debt as a percent of GDP

90 80 70

100 80 60 40 20 1995

Last of 6 default episodes, 1892

60

1999

2003

2007

50 40 30 20

Start of the 2007 financial crisis

10

0 1851 1861 1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 First year of banking crises, 1890, 1923, 1931

External defaults

Sources: OECD, Reinhart and Rogoff (2009) and sources cited therein.

Table 2.53â•…Portugal: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1828 1 n.a. 1837–41 5 1850–56 7 1892–01 10 Number of episodes: 6 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1828 n.a. 11 9.5 1846 1890 1920 1923 1931 6

Memorandum item on IMF programs, 1952–2009 Dates of programs 1977, 1978, 1983

5 worst output collapses, year (decline)

1918 (5.1) 1928 (9.7) 1935 (5.3) 1936 (7.6) 1940 (6.5)

0 Total number of years 3

n.a. = not applicable Note: Some external default episodes involve two defaults.

124â•‡â•‡

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Figure 2.54 Romania: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of exports 180 160 140 120 100 80 60

Hidden debts? Share of private Years debt 1996–2000 23.6 2001–2005 38.2 2007 46.4 1981 is the second of three defaults

40 20 0 1970

1975

1980

1985

1990

Banking crisis

1995

2000

2005

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.54â•…Romania: Default, restructuring, banking crises, growth collapses, and IMF programs, 1878–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1933–58 26 1933–58 1931 n.a. 22.6 9.8 1981–83 4 1990 1986 1 Number of episodes: 3 1 2 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1975, 1977, 1981, 1991–92, 1994, 1997, 1999, 2001, 2004, 2009

5 worst output collapses, year (decline)

1989 (5.8) 1990 (5.6) 1991 (12.9) 1997 (6.1) 2009 (7.2)

Total number of years 10

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 125

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Figure 2.55a Russia: Public foreign bond issues and default, 1815–1945 as a percent of exports 300 250 200 150 100 50 0 1815 1825 1835 1845 1855 1865 1875 1885 1895 1905 1915 1925 1935 1945 Banking crises

First 3 of 5 defaults

Hyperinflation, 1918–24

Domestic debt defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.55â•…Russia: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1839 1 1917–18 1885 1 1947 1918–86 69 1957 1991–97 7 1998–99 1998–2000 3 Number of episodes: 5 4

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1862 1918–24 38.8 13.8 1875 1993 1896 1995 1998 2008 6

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1992, 1995–96, 1999

5 worst output collapses, year (decline)

1992 (14.5) 1993 (8.7) 1994 (12.7) 1998 (5.3) 2009 (7.9)

2 Total number of years 4

Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

126â•‡â•‡

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Figure 2.55b Russia: External (public plus private) debt, default, hyperinflation, and banking crises, 1985–2009 debt as a percent of GDP 100 90 80

Hidden debts?

Banking crisis and renewed default, 1998

70

Share of private debts 0 1.7 14 59.66

Year 1996 1997 1998 2007

60 50 40 30 20 10

Last 2 of 5 defaults

0 1985

1987

1989

1991

1993

Banking crises

1995

1997

1999

External defaults

2001

2003

2005

2007

2009

Hyperinflation, 1993

Sources: Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 127

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Figure 2.56 Singapore: Central government (domestic and external) debt, default, and banking crises, 1969–2009 debt as a percent of GDP 110 The 1997–98 Asian crisis

100 90 80 70 60 50

First year of banking crisis

40 30 1969

1974

1979

1984

1989

1994

1999

2004

Notes: Since the mid-1990s all public debts of the central government have been domestic. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.56â•…Singapore: Default, restructuring, banking crises, growth collapses, and IMF programs, 1965–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

n.a. n.a. n.a. 1982 n.a. 0 2.2 Number of episodes: 0 0 1 0 Memorandum item on IMF programs, 1952–2009 Dates of programs None

3 worst output collapses, year (decline)

1964 (3.5) 2001 (2.4) 2009 (2.0)

Total number of years 0

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics.

128â•‡â•‡

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Figure 2.57a South Africa: Central government (domestic plus external) debt, default, and banking crises, 1911–2009 debt as a percent of GDP 120 1985–87, multilateral trade sanctions and first two default episodes

100

1989: banking crisis and external default

80 60 40 20 0 1911

1921

1931

1941

1951

1961

Banking crises

1971

1981

1991

2001

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.57â•…South Africa: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009 (calculations since independence—1910, reported)

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1985–87 3 n.a. 1989 1 1993 1 Number of episodes: 3 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1865 n.a. 5 1 1877 1890 1977 1989 5 0

Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1958, 1961, 1976(2), 1982–83

3 worst output collapses, year (decline)

1983 (1.8) 1992 (2.1) 2009 (1.8)

Total number of years 6

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 129

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Figure 2.57b South Africa: Private capital inflows from the United Kingdom and banking crises, 1865–1895 capital flows as a percent of exports 300

1890 Barings crisis Private flows as a percent of total Year 1888 70.2 1889 84.8 1890 80.3 1891 40.0

250 200 150 100 50 0

1865 1867 1869 1871 1873 1875 1877 1879 1881 1883 1885 1887 1889 1891 1893 Banking crises Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

130â•‡â•‡

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Figure 2.58a Spain: Short-term loans to the Crown and defaults, 1601–79 billions of ducats, three-year sum 35 30 25 20 15 10 5 0 1600

1610

1620

1630

1640

1650

1660

1670

3 of a total of 13 defaults: 1607, 1627, and 1647 Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.58aâ•…Spain: Domestic default/restructuring, external default, banking crises, and hyperinflation, 1550–1799 External default/ restructuring

Duration (in years)

Domestic default/ restructuring

Banking crisis dates (first year)

Share of Share of Hyper- years in years in inflation external inflation dates default crisis

1557–60 4 1557–60 n.a. n.a. n.a. 1575–77 3 1575–77 1596–97 2 1596–97 1607 1 1627 1 1647 1 Number of episodes: 6 Â€ 3 0 0 Â€ Â€ n.a. = not applicable

A Decade of Debtâ•‡â•‡ 131

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Figure 2.58b    Spain: Central government (domestic plus external) debt, default, and banking crises, 1850–2009 debt as a percent of GDP 180

1877, last of 13 defaults since 1557

160 140 120 100 80 60 40 20

0 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

First year of banking crises, 1920, 1931, 1977, and 2008

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.58bâ•…Spain: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

1809 1 1936–39 1820 1 1831–34 4 1837–67 31 1851 — 1877–82 7 Number of episodes: 6 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1814 n.a. 23.8 3.8 1829 1846 1920 1931 1977 2008 6 0

Memorandum item on IMF programs, 1952–2009 Dates of programs 1959, 1960, 1978

5 worst output collapses, year (decline)

1868 (10.1) 1874 (8.4) 1896 (8.0) 1936 (22.3) 1937 (8.3)

Total number of years 3

n.a. = not applicable

132â•‡â•‡

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Figure 2.58c    Spain: Total (public and private) capital inflows from the United Kingdom and banking crises, 1865–1913 capital flows as a percent of exports, three-year sum 9 8 7 6 5

From 1875 onwards all capital flows are private

4 3 2 1 0 1865

1870

1875

1880

1885

1890

1895

1900

1905

1910

1915

Last of 13 sovereign defaults that began in 1557 Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.58d    Spain banking survey: Domestic credit, default, and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP, 4-quarter moving average 210 190 170 150 130 110 90 1970

1975

1980

1985

1990

1995

2000

2005

First year of banking crises Notes: For periods where no quarterly nominal GDP is available, a moving-average interpolation method is used. Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 133

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Figure 2.59    Sri Lanka: Central government (domestic plus external) debt, default, and banking crises, 1950–2009 debt as a percent of GDP 180 160 140

Two external default episodes

120 100 80 60 40

First year of banking crisis

20 0 1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.59â•…Sri Lanka: Default, restructuring, banking crises, growth collapses, and IMF programs, 1948–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1979 1 1996 1989 n.a. 6.5 3.2 1981–83 3 Number of episodes: 2 1 1 0 Memorandum item on IMF programs, 1952–2009 Dates of programs 1965–66, 1968–69, 1971, 1974, 1977, 1979, 1983, 1988, 1991, 2001, 2003(2)

4 worst output collapses, year (decline)

1918 (–6.5) 1930 (4.0) 1935 (5.2) 1944 (5.5)

Total number of years 14

n.a. = not applicable Sources: Pre-World War II real GDP: Bassino and van del Eng (2006).

134â•‡â•‡

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Figure 2.60a Sweden: Central government (domestic plus external) debt, default, and banking crises, 1719–2009 debt as a percent of GDP 90 80 70 60

Three-year inflation reaches 258 percent, the highest this 300-year period

50 40 30 20 10 0 1719 1739 1759 1779 1799 1819 1839 1859 1879 1899 1919 1939 1959 1979 1999 First year of the banking crises

1811, Sweden’s only default episode (unclear whether it involved external debts)

Notes: Prices are far more volatile during pre–World War II. For this reason, and owing to the fact that deflation is about as likely as inflation prior to the rise of fiat money, we also examine the evolution of (smoother) three-year changes in the price level. Sources: Fregert and Gustafsson (2008); Reinhart and Rogoff (2009) and sources cited therein.

Table 2.60â•…Sweden: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1811 1 n.a. Number of episodes: 1 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1811 n.a. 0.5 1.9 1876 1897 1907 1922 1931 1991 7

Memorandum item on IMF programs, 1952–2009 Dates of programs None

5 worst output collapses, year (decline)1

1826 (8.9) 1838 ( 5.7) 1861 ( 5.7) 1921 (3.7) 2009 (4.2)

0 Total number of years 0

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics.

A Decade of Debtâ•‡â•‡ 135

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Figure 2.60b Sweden banking survey: Domestic credit, default and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP 75 70 65

Domestic credit aggregate expanded coverage, 2002–09 135 125 115 105 2002 2003 2004 2005 2006 2007 2008

60 55 50

First year of banking crisis

45 40 1970

1980

1990

2000

Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

136â•‡â•‡

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Figure 2.61 Switzerland: Central government (domestic plus external) debt and banking crises, 1880–2009 debt as a percent of GDP 90 80 70 60 50 40 30 20 10 0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 First year of banking crises Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.61â•…Switzerland: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

n.a. n.a. n.a. Number of episodes: 0 0

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1870 n.a. n.a. 1910 1921 1931 1933 5 0

Memorandum item on IMF programs, 1952–2009 Dates of programs None

5 worst output collapses, year (decline)1

1854 (11.1) 1860 (13.0) 1867 (12.1) 1877 (9.7) 1975 (7.3)

Total number of years 0

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Sources: Pre-World War II real GDP: Bassino and van del Eng (2006).

A Decade of Debtâ•‡â•‡ 137

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Figure 2.62a    Thailand: Public (domestic and external) and external (public and private) debts, near-default, and banking crises, 1913–2009 debt as a percent of exports 350

“Hidden” and short-term debts on the eve of Asian crisis

300

Share of external debt Year 1985 1995 1997

250 200

Private 22.8 39.1 43.9

Short-term 18.4 52 43.5

150 100 50

Banking crises

08

03

20

98

20

93

19

88

19

83

19

78

19

73

19

68

19

63

19

58

19

53

19

48

19

43

19

38

19

33

19

28

19

23

19

18

19

19

19

13

0

Near-default, 1997–98

Public and private external debts

Public (domestic and external) debt

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.62â•…Thailand: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1997–98 “near” 2 n.a. 1983 n.a. 0 9 1996 Number of episodes: 0 0 2 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1978, 1981–82, 1985, 1997

5 worst output collapses, year (decline)

1919 (4.2) 1942 (9.0) 1945 (6.8) 1998 (10.5) 2009 (2.3) Total number 5

n.a. = not applicable Notes: Summary of private forecasts for 2009 in italics. Near-defaults (not counted in total) are in italics.

138â•‡â•‡

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Figure 2.62b    Thailand banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP 200 180 160 140 120 100 80 60 40 20 0 1970

1975

1980

First year of banking crisis

1985

1990

1995

2000

2005

Currency collapse, recession, near-default

Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 139

02--Chapter 2.2--105-152.indd 139

8/2/11 7:23:37 AM

Figure 2.63 Tunisia: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 80 Last of 5 external defaults

70 60 50

1991 was the first year of a banking crisis, which lasted 5 years

40 30 20 1970

1975

1980

1985

1990

1995

2000

2005

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.63â•…Tunisia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1956–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1867–70 4 n.a. 1991 n.a. 13 0 1956 1 1958 1 1963 1 1979–82 4 Number of episodes: 5 0 1 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1964–67, 1969–70, 1986, 1988

3 worst output collapses, year (decline)

1955 (5.1) 1957 (4.1) 1959 (4.2)

Total number 8

n.a. = not applicable

140â•‡â•‡

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Figure 2.64a Turkey: External public debt, default, and banking crises, 1854–2009 debt as a percent of exports 1,400 1,200 1,000 800 600 400 200 0 1854 1864 1874 1884 1894 1904 1914 1923 1933 1943 1953 1963 1973 1983 1993 2003 Banking crises

8 external default/restructuring episodes

Near-default, 2000–01

Sources: Pamuk (1995), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.64â•…Turkey: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009 (calculations since independence— 1923, reported)

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1876–81 6 n.a. 1931 n.a. 19.5 35.6 1915–28 14 1982 1931–32 2 1991 1940–43 4 2000 1959 1 1965 1 1978–79 2 1982 1 2000–01 â•… (near-default) 2 Number of episodes: 8 0 4 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1961–70, 1978–80, 1983–84, 1994, 1999, 2002

5 worst output collapses, year (decline)1

1927 (9.1) 1932 (6.0) 1994 (5.5) 2001 (5.7) 2009 (5.6)

Total number 18

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics. Near-default (italics) not counted in total. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 141

02--Chapter 2.2--105-152.indd 141

8/2/11 7:23:39 AM

Figure 2.64b Turkey: External public and private debts, default, near-default, and banking crises, 1970–2009 debt as a percent of GDP 70 60 50 40 30

1982 was both a default and banking crisis

20 10 0

1970

1975

1980

Banking crises

1985

1990

1995

External defaults

Public and private debt

2000

2005

Near-default, 2000–01 Private external debt

Sources: Reinhart and Rogoff (2009) and sources cited therein.

142â•‡â•‡

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Figure 2.65a United Kingdom: Central government debt, restructurings, and banking crises, 1692–2009 debt as a percent of GDP 300 World War I debts were 250 restructured in 1932 200 150 100 50

06

91

20

76

19

61

19

46

19

31

19

16

19

01

19

86

19

71

First year of banking crises

18

56

18

41

18

26

18

11

18

96

18

81

17

66

17

51

17

36

17

21

17

17

17

06

0

Domestic debt restructuring

Sources: UKpublicspending (2010), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.65â•…United Kingdom: Default, restructuring, banking crises, growth collapses, and IMF programs, 1800–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

n.a. n.a. 1822 1834 1888–89 1932 Number of episodes: 0 4

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1810 n.a. n.a. 2.4 1815 1825 1837 1847 1857 1866 1878 1890 1974 1984 2007 12

Memorandum item on IMF programs, 1952–2009 Dates of programs 1956–58, 1961–64, 1967, 1969, 1975, 1977

5 worst output collapses, year (decline)1

1919 (10.9) 1920 (6.0) 1921 (8.1) 1931 (5.1) 2009 (4.9)

0 Total 11

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: Summary of private forecasts for 2009 in italics. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 143

02--Chapter 2.2--105-152.indd 143

8/2/11 7:24:03 AM

Figure 2.65b    United Kingdom banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP 190 170

Coverage of domestic credit series expanded

150 130 110 90 70 50 30 1970

1975

1980

1985

1990

1995

2000

2005

First year of banking crises Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

144â•‡â•‡

02--Chapter 2.2--105-152.indd 144

8/2/11 7:24:04 AM

Figure 2.66a    United States: Central government debt, default, and banking crises, 1790–2009 debt as a percent of GDP 140 1790, debt restructuring

100 80 60

1933, suspension of the Gold Clause

1873–84, 10 states in default

120

9 states in default

40 20

80 18 90 19 00 19 10 19 20 19 30 19 40 19 50 19 60 19 70 19 80 19 90 20 00 20 10

70

18

60

18

50

First year of banking crises

18

40

18

30

18

20

18

10

18

00

18

18

17

90

0

Domestic default/debt restructuring

External default, 1790

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.66â•…United States: Default, restructuring, banking crises, growth collapses, and IMF programs, 1790–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

1790 1 1790 1841–42 1873–84 1933 Number of episodes: 1 2

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1814 n.a. n.a. 1.4 1818 1836 1841 1857 1861 1864 1873 1884 1890 1907 1914 1929 1984 2007 15 0 Â€ Â€

Memorandum item on IMF programs, 1952–2009 Dates of programs 1963–64

5 worst output collapses, year (decline)1

1908 (10.8) 1914 (7.7) 1930 (8.6) 1932 (13.1) 1946 (10.1)

Total 2

n.a. = not applicable 1.â•‡ Excludes World Wars I and II. Notes: The default of US states (italics) is not counted in the tally as the total number of episodes refers to sovereign credit events only. Banking crisis years shown in italics indicate that the episode was not deemed to be a systemic crisis.

A Decade of Debtâ•‡â•‡ 145

02--Chapter 2.2--105-152.indd 145

8/2/11 7:24:27 AM

Figure 2.66b    United States: Private capital inflows from the United Kingdom and banking crises, 1865–1914 capital flows as a percent of exports 30 25 20 15 10 5 0 1865

1870

1875

1880

1885

1890

1895

1900

First year of banking crises Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

Figure 2.66c    United States: Private debt outstanding, 1916–2009 end-of-period stock of debt as a percent of GDP 300 Suspension of the Gold Clause, 1933

250 200 150 100 50 0 1916

1926

1936

1946

1956

1966

1976

1986

1996

2006

First year of banking crises Notes: Data for 2009 are end of June. The Flow of Funds is reported for 1945–2009; prior to that the Historical Statistics of the United States series is scaled (down) to match the Flow of Funds data. Sources: Historical Statistics of the United States, Flow of Funds, Board of Governors of the Federal Reserve; International Monetary Fund, World Economic Outlook; OECD; World Bank, Global Development Finance; and Reinhart and Rogoff (2009) and sources cited therein.

146â•‡â•‡

02--Chapter 2.2--105-152.indd 146

8/2/11 7:24:29 AM

Figure 2.66d    United States banking survey: Domestic credit and banking crises, 1970–2008 credit outstanding at end of period as a percent of GDP 250 Burst of IT bubble, spring & fall 2000

230 210 190 170 150 130

Savings and loan decade-long crisis episode

110 90 1970

1975

1980

1985

1990

1995

2000

2005

First year of banking crises Sources: International Monetary Fund, International Financial Statistics; Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 147

02--Chapter 2.2--105-152.indd 147

8/2/11 7:24:30 AM

Figure 2.67a Uruguay: Public (domestic plus external) debt, default, restructuring, and banking crises, 1871–2009 debt as a percent of exports 140 120

Hidden debts on the eve of default, 2003 Share of private debt

Year

100

1991–2000 2001 2002

3.9 6.9 21.6

80 60 40 20 0 1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

First year of banking crises

External defaults

Notes: For the period 1871–1914 only external debt data are available. Domestic debts (only a few observations are available) were negligible during this period. Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.67â•…Uruguay: Default, restructuring, banking crises, growth collapses, and IMF programs, 1811–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1876–78 3 1932–37 1893 n.a. 13 18 1891 1 1898 1915–21 7 1971 1932–38 7 1981 1965 1 2002 1983–85 3 1987 1 1990–91 2 2003 1 Number of episodes: 9 1 5 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1961–62, 1966, 1968, 1970, 1972, 1975–77, 1979–81, 1983, 1985, 1990, 1992, 1997, 1999–2002

6 worst output collapses, year (decline)

1905 (10.1) 1914 (16.7) 1920 (12.8) 1931 (17.3) 1933 (12.5) 1982 (9.3)

Total 21

n.a. = not applicable

148â•‡â•‡

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8/2/11 7:24:30 AM

Figure 2.67b    Uruguay: Total (private and public) capital inflows from the United Kingdom and default and banking crises, 1865–1914 capital flows as a percent of exports, three-year sum 500 450 400 350 300 250 200 150 100 50 0 1865

1870

1875

1880

1885

1890

Banking crises

1895

1900

1905

1910

1915

External defaults

Sources: Stone (1999), Reinhart and Rogoff (2009) and sources cited therein.

A Decade of Debtâ•‡â•‡ 149

02--Chapter 2.2--105-152.indd 149

8/2/11 7:24:31 AM

Figure 2.68    Venezuela: Central government (domestic plus external) debt, default, and banking crises, 1921–2009 debt as a percent of GDP 90

2004 is the last of 10 default episodes

80 70 60 50 40 30

By 1930 Venezuela had paid off all its external debts

20 10

Banking crises

06

01

20

96

20

91

19

86

19

81

19

76

19

71

19

66

19

61

19

56

19

51

19

46

19

41

19

36

19

31

19

26

19

19

19

21

0

External defaults

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.68â•…Venezuela: Default, restructuring, banking crises, growth collapses, and IMF programs, 1829–2009

External default/ restructuring

Banking crisis Domestic dates default/ Duration (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1826–40 15 1995–97 1978 n.a. 35.9 11 1848–59 12 1998 1993 1860–62 3 1865–81 17 1892 1 1898–1905 8 1983–88 6 1990 1 1995–97 3 2004–05 2 Number of episodes: 10 2 2 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009 Dates of programs 1960, 1989, 1996

5 worst output collapses, year (decline)

1914 (12.6) 1931 (19.2) 1942 (12.6) 1989 (8.6) 2002 (8.9)

Total number 3

n.a. = not applicable

150â•‡â•‡

02--Chapter 2.2--105-152.indd 150

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Figure 2.69    Zambia: External (public plus private) debt, default, and banking crises, 1970–2009 debt as a percent of GDP 450 External defaults

400 350 300 250 200 150 100

Banking crisis

50 0 1970

1975

1980

1985

1990

1995

2000

2005

Sources: Reinhart and Rogoff (2009) and sources cited therein.

Table 2.69â•…Zambia: Default, restructuring, banking crises, growth collapses, and IMF programs, 1964–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1983–94 12 n.a. 1995 n.a. 24 40 Number of episodes: 1 0 1 0 Â€ Â€ Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1973, 1976, 1978, 1981, 1983–84, 1986, 1995(2), 1999, 2004, 2008

3 worst output collapses, year (decline)

1966 (5.5) 1977 (4.9) 1994 (13.3)

Total 12

n.a. = not applicable

A Decade of Debtâ•‡â•‡ 151

02--Chapter 2.2--105-152.indd 151

8/2/11 7:24:33 AM

Figure 2.70    Zimbabwe: External (public plus private) debt, default, restructuring, hyperinflation, and banking crises, 1970–2009 debt as a percent of GDP 300

Highest monthly inflation rates in history (percent)

Country

Month with highest rate

Highest monthly inflation rate

Hungary Zimbabwe Yugoslavia Germany Greece China

16,985.00 39,753.00 34,335.00 8,675.00 16,377.00 18,019.00

1.30 × 1,016% 796000000.00 3130000.00 295.00 113.00 42.10

250 200 150 100 50

EquiTime valent required daily for prices rate to double 1.95 0.98 0.65 0.21 0.17 0.13

15.6 hours 24.7 hours 1.4 days 3.7 days 4.5 days 5.6 days

Prior default, 1965–74

0 1970

1975

1980

Ongoing banking crisis (since 1995)

Defaults; latest is ongoing

1985

1990

First year of banking crisis

1995

External default

2000

2005

Hyperinflation

Sources: Hanke (2008), Reinhart and Rogoff (2009) and sources cited therein.

Table 2.70â•…Zimbabwe: Default, restructuring, banking crises, growth collapses, hyperinflation, and IMF programs, 1965–2009

External default/ restructuring

Banking Domestic crisis Duration default/ dates (in years) restructuring (first year)

Hyperinflation dates

Share of years in external default

Share of years in inflation crisis

1965–74 10 2006 1995 2006–09 40 40 2000–09 10 Number of episodes: 2 1 1 1 Â€ Â€ Memorandum item on IMF programs, 1952–2009Â€ Dates of programs 1981, 1983, 1992 (3), 1998, 1999

5 worst output collapses, year (decline)

1977 (8.0) 1992 (8.4) 2000 (7.3) 2003 (10.4) 2008 (14.1) Total 7

152â•‡â•‡

02--Chapter 2.2--105-152.indd 152

8/2/11 7:24:34 AM

About the Authors

Carmen M. Reinhart is the new Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics. She was previously professor of economics and director of the Center for International Economics at the University of Maryland. She was chief economist and vice president at the investment bank Bear Stearns in the 1980s and spent several years at the International Monetary Fund. She is a research associate at the National Bureau of Economic Research, research fellow at the Centre for Economic Policy Research, and member of the Congressional Budget Office Panel of Economic Advisers and Council on Foreign Relations. She has served on many editorial boards and has frequently testified before Congress. Reinhart’s work has helped to inform the understanding of financial crises for over a decade. Her numerous papers on macroeconomics, international finance, and trade have been published in leading scholarly journals. She is the recipient of the 2010 TIAA-CREF Paul A. Samuelson Award. Her best-selling book (with Kenneth S. Rogoff) entitled This Time is Different: Eight Centuries of Financial Folly, which has been translated into 13 languages, documents the striking similarities of the recurring booms and busts that have characterized financial history. She received her PhD from Columbia University. Kenneth S. Rogoff is a member of the Peterson Institute for International Economics Advisory Committee and the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. He also served as chief economist and director of research at the International Monetary Fund (2001–03). He is the recipient of the 2010 TIAA-CREF Paul A. Samuelson Award. 153

His publications include This Time is Different: Eight Centuries of Financial Folly, Handbook of International Economics Volume III, and Foundations of International Macroeconomics. Rogoff is a frequent commentator for NPR, the Wall Street Journal, and the Financial Times.

154â•…

Index

aftermath of high debt, 29, 31 Australia, 25, 51–52 Austria, 29, 53–54 bailout approach, 3, 6, 17 bank(s) direct ownership of, 5b high debt levels, 13 lending rate ceilings, 4b, 18, 31 tax levy on, 5b banking crises, 2–3 debt and, 5–8, 7f, 28 as predictors of sovereign debt problems, 13–18, 16f, 17t Belgium, 25, 55 bond market, 35 Bretton Woods system, 3, 3n, 5b Canada, 25, 60–61 capital controls, 5b, 18, 31 capital flow bonanza, 20 capital flow cycle, contagion and, 19b, 20 capital inflows, 12 central banks interest rate targets, 4b role of, 35 Chile, 12, 63–64 common creditors, 19b, 20 contagion, 18–20 contagion amplifiers, 20 country histories of debt, default, and financial crises, 39–152

credit, directed toward government, 5b, 31 credit market debt, 34f, 33 credit ratings, 20, 33 cross-border exposure, transparency in, 20 cross-country linkages, 18–20 currency appreciation, 35 current account deficit, 13, 20 debt private (See private debt) public (See public debt) debt buybacks, 35 debt-equity swaps, 35 debt-growth causality, 28–29 debt intolerance phenomenon, 35 debt reduction process, 2 debt restructuring, 10f, 11t, 11–12, 29 historical perspective, 29, 30t–31t need for, 35 debt-to-GDP ratios, 1, 21–23, 22f–23f, 27 domestic credit events, 29 economic growth, 2 analysis of, 21–23, 22f–23f, 28–29 forecasts, 33–35 equities, transaction taxes on, 5b “fast and furious” contagion, 18–20 financial crash-debt crisis sequence, 9 financial crises, 2–3

155

debt and, 5–8, 7f, 28 as predictors of sovereign debt problems, 13–18, 16f, 17t financial industry, regulation of, 5b, 31 financial repression, 3, 31–32 banking crises and, 18 defined, 4b–5b historical perspective, 29–32, 32t literature on, 3n need for, 35 fiscal balance, 6 Flow of Funds data, 33, 33n forced home bias, 5b foreign capital, 12 France, 25, 80 GDP ratio economic growth and, 21–23, 22f–23f, 28–29 forecasts, 34f, 33–35 private debt and, 12–13, 14f–15f thresholds and nonlinearities, 25–28, 26f, 33–35 Germany, 29, 81–82 government bond market, 35 government debt. See public debt Great Depression, 5, 6f, 29 Greece, 11–12, 12f, 25, 29, 84–85 gross central government debt. See public debt high debt episodes, 24t, 24–25 aftermath of, 29–32 history of debt and economic crisis, 39–152 Iceland, 9, 12–13, 14f–15f, 89–90 inflation, 10f, 11, 21, 28 interest rates, 2 ceilings on, 4b, 18, 31–32 central bank targets, 4b debt intolerance ceilings and, 35 International Monetary Fund, 20 international transmission, fundamentals versus contagion, 18–20 Ireland, 9, 12–13, 14f–15f, 25, 94–95 Italy, 25, 29, 32, 32t, 96

surge in, 1–2, 5 that becomes public, 12–13 prudential regulation, 5b, 35 public debt defined, 1n, 21n financial crises and, 5–8, 7f, 28 GDP ratio (See GDP ratio) growth and (See economic growth) inflation and, 10f, 11, 21, 28 migration of private debt to, 12–13 reduction process, 1–3 (See also financial repression) thresholds, 21–23, 22f–23f 90 percent benchmark, 25–28, 26f public debt surge, 1–3 2007–10 (global), 8f, 9 aftermath of, 29–32 historical perspective, 4–9, 6f, 24t, 24–25, 29–32 sovereign default and restructuring, 10f, 11t, 11–12 historical perspective, 29, 30t–31t need for, 35 public policy agenda, 2 reserve requirements, 5b, 31 serial default, 11–12, 12f, 29 shocks, 18–20, 19b 'slow-burn' spillover, 19b sovereign ceiling, 18 sovereign debt crises, 2–3 banking crises as predictors of, 13–18, 16f, 17t sovereign default and restructuring, 10f, 11t, 11–12, 29 historical perspective, 29, 30t–31t need for, 35 sovereign downgrades, 20 Spain, 25, 131–33 spillovers, 18–20 Standard and Poor's, 20 stimulus packages, 9 subprime mortgage crisis, 3, 18 surprise crises, 19b, 20

Japan, 25, 29, 97–98 legislation, 31–32 leverage, 19b, 20 Maastricht criteria, 12n, 25 moral suasion, 31–32 private debt deleveraging, 2, 2n, 20, 33

156

taxes, 5b, 28 temporal causality tests, 28 This Time is Different: Eight Centuries of Financial Folly (Reinhart & Rogoff), 27, 41 This Time is Different Syndrome, 33, 33n thresholds, 21–23, 22f–23f 90 percent benchmark, 25–28, 26f transparency, in cross-border exposure, 20 twin crisis phenomenon, 13

United Kingdom, 9, 25, 32, 32t, 143–44 United States, 145–47 contagion, 18 credit market debt, 34f, 33 credit rating, 20, 33 debt buildup, 9, 25 financial repression, 32, 32t

government bonds, 35 growth forecasts, 33–35 vulnerability regions, 27 World War debts, 4–5, 6f, 7f aftermath, 29–32 growth and, 21, 24t, 25

A DECADE OF DEBT 157

Other Publications from the Peterson Institute for International Economics WORKING PAPERS 94-1

APEC and Regional Trading Arrangements in the Pacific Jeffrey A. Frankel with Shang-Jin Wei and Ernesto Stein 94-2 Towards an Asia Pacific Investment Code Edward M. Graham 94-3 Merchandise Trade in the APEC Region: Is There Scope for Liberalization on an MFN Basis? Paul Wonnacott 94-4 The Automotive Industry in Southeast Asia: Can Protection Be Made Less Costly? Paul Wonnacott 94-5 Implications of Asian Economic Growth Marcus Noland 95-1 APEC: The Bogor Declaration and the Path Ahead C. Fred Bergsten 95-2 From Bogor to Miami…and Beyond: Regionalism in the Asia Pacific and the Western Hemisphere Jeffrey J. Schott 95-3 Has Asian Export Performance Been Unique? Marcus Noland 95-4 Association of Southeast Asian Nations and ASEAN Free Trade Area: Chronology and Statistics Gautam Jaggi 95-5 The North Korean Economy Marcus Noland 95-6 China and the International Economic System Marcus Noland 96-1 APEC after Osaka: Toward Free Trade by 2010/2020 C. Fred Bergsten 96-2 Public Policy, Private Preferences, and the Japanese Trade Pattern Marcus Noland 96-3 German Lessons for Korea: The Economics of Unification Marcus Noland 96-4 Research and Development Activities and Trade Specialization in Japan Marcus Noland 96-5 China’s Economic Reforms: Chronology and Statistics Gautam Jaggi, Mary Rundle, Daniel H. Rosen, and Yuichi Takahashi 96-6 US-China Economic Relations Marcus Noland 96-7 The Market Structure Benefits of Trade and Investment Liberalization Raymond Atje and Gary Clyde Hufbauer 96-8 The Future of US-Korea Economic Relations Marcus Noland 96-9 Competition Policies in the Dynamic Industrializing Economies: The Case of China, Korea, and Chinese Taipei Edward M. Graham

96-10 Modeling Economic Reform in North Korea Marcus Noland, Sherman Robinson, and Monica Scatasta 96-11 Trade, Investment, and Economic Conflict Between the United States and Asia Marcus Noland 96-12 APEC in 1996 and Beyond: The Subic Summit C. Fred Bergsten 96-13 Some Unpleasant Arithmetic Concerning Unification Marcus Noland 96-14 Restructuring Korea’s Financial Sector for Greater Competitiveness Marcus Noland 96-15 Competitive Liberalization and Global Free Trade: A Vision for the 21st Century C. Fred Bergsten 97-1 Chasing Phantoms: The Political Economy of USTR Marcus Noland 97-2 US-Japan Civil Aviation: Prospects for Progress Jacqueline McFadyen 97-3 Open Regionalism C. Fred Bergsten 97-4 Lessons from the Bundesbank on the Occasion of Its 40th (and Second to Last?) Birthday Adam S. Posen 97-5 The Economics of Korean Unification Marcus Noland, Sherman Robinson, and Li-Gang Liu 98-1 The Costs and Benefits of Korean Unification Marcus Noland, Sherman Robinson, and Li-Gang Liu 98-2 Asian Competitive Devaluations Li-Gang Liu, Marcus Noland, Sherman Robinson, and Zhi Wang 98-3 Fifty Years of the GATT/WTO: Lessons from the Past for Strategies or the Future C. Fred Bergsten 98-4 NAFTA Supplemental Agreements: Four Year Review Jacqueline McFadyen 98-5 Local Government Spending: Solving the Mystery of Japanese Fiscal Packages Hiroko Ishii and Erika Wada 98-6 The Global Economic Effects of the Japanese Crisis Marcus Noland, Sherman Robinson, and Zhi Wang 98-7 The Relationship Between Trade and Foreign Investment: Empirical Results for Taiwan and South Korea Li-Gang Liu, The World Bank, and Edward M. Graham 99-1 Rigorous Speculation: The Collapse and Revival of the North Korean Economy Marcus Noland, Sherman Robinson, and Tao Wang

99-2 99-3 99-4 99-5 99-6 99-7 99-8 99-9 99-10 99-11 99-12 00-1 00-2 00-3 00-4 00-5 00-6 00-7 00-8 00-9 01-1 01-2

Famine in North Korea: Causes and Cures Marcus Noland, Sherman Robinson, and Tao Wang Competition Policy and FDI: A Solution in Search of a Problem? Marcus Noland The Continuing Asian Financial Crisis: Global Adjustment and Trade Marcus Noland, Sherman Robinson, and Zhi Wang Why EMU Is Irrelevant for the German Economy Adam S. Posen The Global Trading System and the Developing Countries in 2000 C. Fred Bergsten Modeling Korean Unification Marcus Noland, Sherman Robinson, and Tao Wang Sovereign Liquidity Crisis: The Strategic Case for a Payments Standstill Marcus Miller and Lei Zhang The Case for Joint Management of Exchange Rate Flexibility C. Fred Bergsten, Olivier Davanne, and Pierre Jacquet Does Talk Matter After All? Inflation Targeting and Central Bank Behavior Kenneth N. Kuttner and Adam S. Posen Hazards and Precautions: Tales of International Finance Gary Clyde Hufbauer and Erika Wada The Globalization of Services: What Has Happened? What Are the Implications? Gary Clyde Hufbauer and Tony Warren Regulatory Standards in the WTO Keith Maskus International Economic Agreements and the Constitution Richard M. Goodman and John M. Frost Electronic Commerce in Developing Countries Catherine L. Mann The New Asian Challenge C. Fred Bergsten How the Sick Man Avoided Pneumonia: The Philippines in the Asian Financial Crisis Marcus Noland Inflation, Monetary Transparency, and G-3 Exchange Rate Volatility Kenneth N. Kuttner and Adam S. Posen Transatlantic Issues in Electronic Commerce Catherine L. Mann Strengthening the International Financial Architecture: Where Do We Stand? Morris Goldstein On Currency Crises and Contagion Marcel Fratzscher Price Level Convergence and Inflation in Europe John H. Rogers, Gary Clyde Hufbauer, and Erika Wada Subsidies, Market Closure, CrossBorder Investment, and Effects on Competition: The Case of FDI on the Telecommunications Sector Edward M. Graham

01-3

Foreign Direct Investment in China: Effects on Growth and Economic Performance Edward M. Graham and Erika Wada 01-4 IMF Structural Conditionality: How Much Is Too Much? Morris Goldstein 01-5 Unchanging Innovation and Changing Economic Performance in Japan Adam S. Posen 01-6 Rating Banks in Emerging Markets Liliana Rojas-Suarez 01-7 Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks Kenneth N. Kuttner and Adam S. Posen 01-8 Finance and Changing US-Japan Relations: Convergence Without Leverage—Until Now Adam S. Posen 01-9 Macroeconomic Implications of the New Economy Martin Neil Baily 01-10 Can International Capital Standards Strengthen Banks in Emerging Markets? Liliana Rojas-Suarez 02-1 Moral Hazard and the US Stock Market: Analyzing the “Greenspan Put”? Marcus Miller, Paul Weller, and Lei Zhang 02-2 Passive Savers and Fiscal Policy Effectiveness in Japan Kenneth N. Kuttner and Adam S. Posen 02-3 Home Bias, Transaction Costs, and Prospects for the Euro: A More Detailed Analysis Catherine L. Mann and Ellen E. Meade 02-4 Toward a Sustainable FTAA: Does Latin America Meet the Necessary Financial Preconditions? Liliana Rojas-Suarez 02-5 Assessing Globalization’s Critics: “Talkers Are No Good Doers???” Kimberly Ann Elliott, Debayani Kar, and J. David Richardson 02-6 Economic Issues Raised by Treatment of Takings under NAFTA Chapter 11 Edward M. Graham 03-1 Debt Sustainability, Brazil, and the IMF Morris Goldstein 03-2 Is Germany Turning Japanese? Adam S. Posen 03-3 Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants Andrew B. Bernard, J. Bradford Jensen, and Peter K. Schott 03-4 Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics Andrew B. Bernard, J. Bradford Jensen, and Peter K. Schott 03-5 Famine and Reform in North Korea Marcus Noland 03-6 Empirical Investigations in Inflation Targeting Yifan Hu 03-7 Labor Standards and the Free Trade Area of the Americas Kimberly Ann Elliott

03-8 03-9 03-10

04-1 04-2 04-3 05-1 05-2

05-3 05-4 05-5 05-6 05-7 05-8

05-9

05-10 05-11 05-12 05-13 05-14 05-15

Religion, Culture, and Economic Performance Marcus Noland It Takes More than a Bubble to Become Japan Adam S. Posen The Difficulty of Discerning What’s Too Tight: Taylor Rules and Japanese Monetary Policy Adam S. Posen and Kenneth N. Kuttner Adjusting China’s Exchange Rate Policies Morris Goldstein Popular Attitudes, Globalization, and Risk Marcus Noland Selective Intervention and Growth: The Case of Korea Marcus Noland Outsourcing and Offshoring: Pushing the European Model Over the Hill, Rather Than Off the Cliff! Jacob Funk Kirkegaard China’s Role in the Revived Bretton Woods System: A Case of Mistaken Identity Morris Goldstein and Nicholas R. Lardy Affinity and International Trade Marcus Noland South Korea’s Experience with International Capital Flows Marcus Noland Explaining Middle Eastern Authoritarianism Marcus Noland Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances Edwin M. Truman What Might the Next Emerging Market Financial Crisis Look Like? Morris Goldstein, assisted by Anna Wong Egypt after the Multi-Fiber Arrangement: Global Approval and Textile Supply Chains as a Route for Industrial Upgrading Dan Magder Tradable Services: Understanding the Scope and Impact of Services Offshoring J. Bradford Jensen and Lori G. Kletzer Importers, Exporters, and Multinationals: A Portrait of Firms in the US that Trade Goods Andrew B. Bernard, J. Bradford Jensen, and Peter K. Schott The US Trade Deficit: A Disaggregated Perspective Catherine L. Mann and Katharina Plück Prospects for Regional Free Trade in Asia Gary Clyde Hufbauer and Yee Wong Predicting Trade Expansion under FTAs and Multilateral Agreements Dean A. DeRosa and John P. Gilbert The East Asian Industrial Policy Experience: Implications for the Middle East Marcus Noland and Howard Pack Outsourcing and Skill Imports: Foreign High-Skilled Workers on H-1B and L-1 Visas in the United States Jacob Funk Kirkegaard

06-1 06-2 06-3 06-4 06-5 06-6 06-7 07-1 07-2

07-3 07-4 07-5 07-6 07-7 07-8

07-9

08-1 08-2 08-3 08-4

Why Central Banks Should Not Burst Bubbles Adam S. Posen The Case for an International Reserve Diversification Standard Edwin M. Truman and Anna Wong Offshoring in Europe—Evidence of a Two-Way Street from Denmark Peter Ørberg Jensen, Jacob Funk Kirkegaard, and Nicolai Søndergaard Laugesen The External Policy of the Euro Area: Organizing for Foreign Exchange Intervention C. Randall Henning The Eurasian Growth Paradox Anders Åslund and Nazgul Jenish Has EMU Had Any Impact on the Degree of Wage Restraint? Adam S. Posen and Daniel Popov Gould Firm Structure, Multinationals, and Manufacturing Plant Deaths Andrew B. Bernard and J. Bradford Jensen The Trade Effects of Preferential Arrangements: New Evidence from the Australia Productivity Commission Dean A. DeRosa Offshoring, Outsourcing, and Production Relocation―Labor-Market Effects in the OECD Countries and Developing Asia Jacob Funk Kirkegaard Do Markets Care Who Chairs the Central Bank? Kenneth N. Kuttner and Adam S. Posen Industrial Policy, Innovative Policy, and Japanese Competitiveness: Japan’s Pursuit of Competitive Advantage Marcus Noland A (Lack of) Progress Report on China’s Exchange Rate Policies Morris Goldstein Measurement and Inference in International Reserve Diversification Anna Wong North Korea’s External Economic Relations Stephan Haggard and Marcus Noland Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed C. Randall Henning Merry Sisterhood or Guarded Watchfulness? Cooperation Between the International Monetary Fund and the World Bank Michael Fabricius Exit Polls: Refugee Assessments of North Korea‘s Transitions Yoonok Chang, Stephan Haggard, and Marcus Noland Currency Undervaluation and Sovereign Wealth Funds: A New Role for the WTO Aaditya Mattoo and Arvind Subramanian Exchange Rate Economics John Williamson Migration Experiences of North Korean Refugees: Survey Evidence from China Yoonok Chang, Stephan Haggard, and Marcus Noland

08-5 08-6 08-7 08-8 08-9 08-10

08-11 08-12 09-1 09-2 09-3 09-4

09-5

09-6

09-7 09-8 09-9

09-10 09-11 09-12

Korean Institutional Reform in Comparative Perspective Marcus Noland and Erik Weeks Estimating Consistent Fundamental Equilibrium Exchange Rates William R. Cline Policy Liberalization and FDI Growth, 1982 to 2006 Matthew Adler and Gary Clyde Hufbauer Multilateralism Beyond Doha Aaditya Mattoo and Arvind Subramanian Famine in North Korea Redux? Stephan Haggard and Marcus Noland Recent Trade Patterns and Modes of Supply in Computer and Information Services in the United States and NAFTA Partners Jacob Funk Kirkegaard On What Terms Is the IMF Worth Funding? Edwin M. Truman The (Non) Impact of UN Sanctions on North Korea Marcus Noland The GCC Monetary Union: Choice of Exchange Rate Regime Mohsin S. Khan Policy Liberalization and US Merchandise Trade Growth, 1980–2006 Gary Clyde Hufbauer and Matthew Adler American Multinationals and American Economic Interests: New Dimensions to an Old Debate Theodore H. Moran Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation Stephan Haggard and Marcus Noland Structural and Cyclical Trends in Net Employment over US Business Cycles, 1949–2009: Implications for the Next Recovery and Beyond Jacob Funk Kirkegaard What’s on the Table? The Doha Round as of August 2009 Matthew Adler, Claire Brunel, Gary Clyde Hufbauer, and Jeffrey J. Schott Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment Aaditya Mattoo and Arvind Subramanian Reform from Below: Behavioral and Institutional Change in North Korea Stephan Haggard and Marcus Noland The World Trade Organization and Climate Change: Challenges and Options Gary Clyde Hufbauer and Jisun Kim A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds Christopher D. Carroll and Olivier Jeanne The Impact of the Financial Crisis on Emerging Asia Morris Goldstein and Daniel Xie Capital Flows to Developing Countries: The Allocation Puzzle Pierre-Olivier Gourinchas and Olivier Jeanne

09-13 Mortgage Loan Modifications: Program Incentives and Restructuring Design Dan Magder 09-14 It Should Be a Breeze: Harnessing the Potential of Open Trade and Investment Flows in the Wind Energy Industry Jacob Funk Kirkegaard, Thilo Hanemann, and Lutz Weischer 09-15 Reconciling Climate Change and Trade Policy Aaditya Mattoo, Arvind Subramanian, Dominique van der Mensbrugghe, and Jianwu He 09-16 The International Monetary Fund and Regulatory Challenges Edwin M. Truman 10-1 Estimation of De Facto Flexibility Parameter and Basket Weights in Evolving Exchange Rate Regimes Jeffrey Frankel and Daniel Xie 10-2 Economic Crime and Punishment in North Korea Stephan Haggard and Marcus Noland 10-3 Intra-Firm Trade and Product Contractibility Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott 10-4 The Margins of US Trade Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott 10-5 Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach Olivier Jeanne and Anton Korinek 10-6 Toward a Sunny Future? Global Integration in the Solar PV Industry Jacob Funk Kirkegaard, Thilo Hanemann, Lutz Weischer, Matt Miller 10-7 The Realities and Relevance of Japan’s Great Recession: Neither Ran nor Rashomon Adam S. Posen 10-8 Do Developed and Developing Countries Compete Head to Head in High Tech? Lawrence Edwards and Robert Z. Lawrence 10-9 US Trade and Wages: The Misleading Implications of Conventional Trade Theory Lawrence Edwards and Robert Z. Lawrence 10-10 Wholesalers and Retailers in US Trade Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott 10-11 The Design and Effects of Monetary Policy in Sub-Saharan African Countries Mohsin S. Khan 10-12 Managing Credit Booms and Busts: A Pigouvian Taxation Approach Olivier Jeanne and Anton Korinek 10-13 The G-20 and International Financial Institution Governance Edwin M. Truman 10-14 Reform of the Global Financial Architecture Garry J. Schinasi and Edwin M. Truman 10-15 A Role for the G-20 in Addressing Climate Change? Trevor Houser

10-16 Exchange Rate Policy in Brazil John Williamson 10-17 Trade Disputes Between China and the United States: Growing Pains so Far, Worse Ahead? Gary Clyde Hufbauer and Jared C. Woollacott 10-18 Sovereign Bankruptcy in the European Union in the Comparative Perspective Leszek Balcerowicz 11-1 Current Account Imbalances Coming Back Joseph Gagnon 11-2 Too Big to Fail: The Transatlantic Debate Morris Goldstein and Nicolas Véron 11-3 Foreign Direct Investment in Times of Crisis Lauge Skovgaard Poulsen and Gary Clyde Hufbauer 11-4 A Generalized Fact and Model of LongRun Economic Growth: Kaldor Fact as a Special Case Daniel Danxia Xie 11-5 Integrating Reform of Financial Regulation with Reform of the International Monetary System Morris Goldstein 11-6 Capital Account Liberalization and the Role of the RMB Nicholas Lardy and Patrick Douglass 11-7 Capital Controls: Myth and Reality—A Portfolio Balance Approach Nicolas E. Magud, Carmen M. Reinhart, and Kenneth S. Rogoff 11-8 Resource Management and Transition in Central Asia, Azerbaijan, and Mongolia Richard Pomfret 11-9 Coordinating Regional and Multilateral Financial Institutions C. Randall Henning 11-10 The Liquidation of Government Debt Carmen M. Reinhart and M. Belen Sbrancia 11-11 Foreign Manufacturing Multinationals and the Transformation of the Chinese Economy: New Measurements, New Perspectives Theodore H. Moran 11-12 Sovereign Wealth Funds: Is Asia Different? Edwin M. Truman 11-13 Integration in the Absence of Institutions: China-North Korea CrossBorder Exchange Stephan Haggard, Jennifer Lee, and Marcus Noland POLICY BRIEFS 98-1 98-2

The Asian Financial Crisis Morris Goldstein The New Agenda with China C. Fred Bergsten

98-3

Exchange Rates for the Dollar, Yen, and Euro Simon Wren-Lewis 98-4 Sanctions-Happy USA Gary Clyde Hufbauer 98-5 The Depressing News from Asia Marcus Noland, Sherman Robinson, and Zhi Wang 98-6 The Transatlantic Economic Partnership Ellen L. Frost 98-7 A New Strategy for the Global Crisis C. Fred Bergsten 98-8 Reviving the ”Asian Monetary Fund“ C. Fred Bergsten 99-1 Implementing Japanese Recovery Adam S. Posen 99-2 A Radical but Workable Restructuring Plan for South Korea Edward M. Graham 99-3 Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility John Williamson 99-4 Market Mechanisms to Reduce the Need for IMF Bailouts Catherine L. Mann 99-5 Steel Quotas: A Rigged Lottery Gary Clyde Hufbauer and Erika Wada 99-6 China and the World Trade Organization: An Economic Balance Sheet Daniel H. Rosen 99-7 Trade and Income Distribution: The Debate and New Evidence William R. Cline 99-8 Preserve the Exchange Stabilization Fund C. Randall Henning 99-9 Nothing to Fear but Fear (of Inflation) Itself Adam S. Posen 99-10 World Trade after Seattle: Implications for the United States Gary Clyde Hufbauer 00-1 The Next Trade Policy Battle C. Fred Bergsten 00-2 Decision-Making in the WTO Jeffrey J. Schott and Jayashree Watal 00-3 American Access to China’s Market: The Congressional Vote on PNTR Gary Clyde Hufbauer and Daniel H. Rosen 00-4 Third Oil Shock: Real or Imaginary? Consequences and Policy Alternatives Philip K. Verleger, Jr. 00-5 The Role of the IMF: A Guide to the Reports John Williamson 00-6 The ILO and Enforcement of Core Labor Standards Kimberly Ann Elliott 00-7 “No” to Foreign Telecoms Equals “No” to the New Economy! Gary Clyde Hufbauer and Edward M. Graham 01-1 Brunei: A Turning Point for APEC? C. Fred Bergsten 01-2 A Prescription to Relieve Worker Anxiety Lori G. Kletzer and Robert E. Litan

01-3 01-4 01-5 01-6 01-7 01-8 01-9 01-10 01-11 02-1 02-2

03-2 03-3 03-4

03-5 03-6 03-7

03-1

02-9 02-10

02-7 02-8

02-5 02-6

More Pain, More Gain: Politics and Economics of Eliminating Tariffs Gary Clyde Hufbauer and Ben Goodrich 03-9 EU Accession and the Euro: Close Together or Far Apart? Peter B. Kenen and Ellen E. Meade 03-10 Next Move in Steel: Revocation or Retaliation? Gary Clyde Hufbauer and Ben Goodrich 03-11 Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth Catherine L. Mann 04-1 This Far and No Farther? Nudging Agricultural Reform Forward Tim Josling and Dale Hathaway 04-2 Labor Standards, Development, and CAFTA Kimberly Ann Elliott 04-3 Senator Kerry on Corporate Tax Reform: Right Diagnosis, Wrong Prescription Gary Clyde Hufbauer and Paul Grieco 04-4 Islam, Globalization, and Economic Performance in the Middle East Marcus Noland and Howard Pack 04-5 China Bashing 2004 Gary Clyde Hufbauer and Yee Wong 04-6 What Went Right in Japan Adam S. Posen 04-7 What Kind of Landing for the Chinese Economy? Morris Goldstein and Nicholas R. Lardy 05-1 A Currency Basket for East Asia, Not Just China John Williamson 05-2 After Argentina Anna Gelpern 05-3 Living with Global Imbalances: A Contrarian View Richard N. Cooper 05-4 The Case for a New Plaza Agreement William R. Cline 06-1 The United States Needs German Economic Leadership Adam S. Posen 06-2 The Doha Round after Hong Kong Gary Clyde Hufbauer and Jeffrey J. Schott 06-3 Russia’s Challenges as Chair of the G-8 Anders Åslund 06-4 Negotiating the Korea–United States Free Trade Agreement Jeffrey J. Schott, Scott C. Bradford, and Thomas Moll 06-5 Can Doha Still Deliver on the Development Agenda? Kimberly Ann Elliott 06-6 China: Toward a Consumption Driven Growth Path Nicholas R. Lardy 06-7 Completing the Doha Round Jeffrey J. Schott 06-8 Choosing Monetary Arrangements for the 21st Century: Problems of a Small Economy John Williamson 06-9 Can America Still Compete or Does It Need a New Trade Paradigm? Martin Neil Baily and Robert Z. Lawrence 07-1 The IMF Quota Formula: Linchpin of Fund Reform Richard N. Cooper and Edwin M. Truman 07-2 Toward a Free Trade Area of the Asia Pacific C. Fred Bergsten

02-4

03-8

02-3

The US Export-Import Bank: Time for an Overhaul Gary Clyde Hufbauer Japan 2001—Decisive Action or Financial Panic Adam S. Posen Fin(d)ing Our Way on Trade and Labor Standards? Kimberly Ann Elliott Prospects for Transatlantic Competition Policy Mario Monti The International Implications of Paying Down the Debt Edwin M. Truman Dealing with Labor and Environment Issues in Trade Promotion Legislation Kimberly Ann Elliott Steel: Big Problems, Better Solutions Gary Clyde Hufbauer and Ben Goodrich Economic Policy Following the Terrorist Attacks Martin Neil Baily Using Sanctions to Fight Terrorism Gary Clyde Hufbauer, Jeffrey J. Schott, and Barbara Oegg Time for a Grand Bargain in Steel? Gary Clyde Hufbauer and Ben Goodrich Prospects for the World Economy: From Global Recession to Global Recovery Michael Mussa Sovereign Debt Restructuring: New Articles, New ContractsÂ�—or No Change? Marcus Miller Support the Ex-Im Bank: It Has Work to Do! Gary Clyde Hufbauer and Ben Goodrich The Looming Japanese Crisis Adam S. Posen Capital-Market Access: New Frontier in the Sanctions Debate Gary Clyde Hufbauer and Barbara Oegg Is Brazil Next? John Williamson Further Financial Services Liberalization in the Doha Round? Wendy Dobson Global Economic Prospects Michael Mussa The Foreign Sales Corporation: Reaching the Last Act? Gary Clyde Hufbauer Steel Policy: The Good, the Bad, and the Ugly Gary Clyde Hufbauer and Ben Goodrich Global Economic Prospects: Through the Fog of Uncertainty Michael Mussa Economic Leverage and the North Korean Nuclear Crisis Kimberly Ann Elliott The Impact of Economic Sanctions on US Trade: Andrew Rose’s Gravity Model Gary Clyde Hufbauer and Barbara Oegg Reforming OPIC for the 21st Century Theodore H. Moran and C. Fred Bergsten The Strategic Importance of US-Korea Economic Relations Marcus Noland Rules Against Earnings Stripping: Wrong Answer to Corporate Inversions Gary Clyde Hufbauer and Ariel Assa

07-3 07-4 07-5 07-6 07-7 07-8 08-1

08-2 08-3 08-4

08-5 08-6 08-7 08-8 09-1 09-2 09-3 09-4 09-5 09-6 09-7

09-8

China and Economic Integration in East Asia: Implications for the United States C. Fred Bergsten Global Imbalances: Time for Action Alan Ahearne, William R. Cline, Kyung Tae Lee, Yung Chul Park, Jean PisaniFerry, and John Williamson American Trade Politics in 2007: Building Bipartisan Compromise I. M. Destler Sovereign Wealth Funds: The Need for Greater Transparency and Accountability Edwin M. Truman The Korea-US Free Trade Agreement: A Summary Assessment Jeffrey J. Schott The Case for Exchange Rate Flexibility in Oil-Exporting Economies Brad Setser “Fear“ and Offshoring: The Scope and Potential Impact of Imports and Exports of Services J. Bradford Jensen and Lori G. Kletzer Strengthening Trade Adjustment Assistance Howard F. Rosen A Blueprint for Sovereign Wealth Fund Best Practices Edwin M. Truman A Security and Peace Mechanism for Northeast Asia: The Economic Dimension Stephan Haggard and Marcus Noland World Trade at Risk C. Fred Bergsten North Korea on the Precipice of Famine Stephan Haggard, Marcus Noland, and Erik Weeks New Estimates of Fundamental Equilibrium Exchange Rates William R. Cline and John Williamson Financial Repression in China Nicholas R. Lardy Did Reagan Rule In Vain? A Closer Look at True Expenditure Levels in the United States and Europe Jacob Funk Kirkegaard Buy American: Bad for Jobs, Worse for Reputation Gary Clyde Hufbauer and Jeffrey J. Schott A Green Global Recovery? Assessing US Economic Stimulus and the Prospects for International Coordination Trevor Houser, Shashank Mohan, and Robert Heilmayr Money for the Auto Industry: Consistent with WTO Rules? Claire Brunel and Gary Clyde Hufbauer The Future of the Chiang Mai Initiative: An Asian Monetary Fund? C. Randall Henning Pressing the “Reset Button“ on USRussia Relations Anders Åslund and Andrew Kuchins US Taxation of Multinational Corporations: What Makes Sense, What Doesn‘t Gary Clyde Hufbauer and Jisun Kim Energy Efficiency in Buildings: A Global Economic Perspective Trevor Houser

09-9 09-10 09-11 09-12 09-13 09-14

09-15 09-16 09-17 09-18 09-19 09-20 09-21 09-22 10-1 10-2 10-3 10-4 10-5 10-6 10-7 10-8 10-9 10-10

10-11

The Alien Tort Statute of 1789: Time for a Fresh Look Gary Clyde Hufbauer 2009 Estimates of Fundamental Equilibrium Exchange Rates William R. Cline and John Williamson Understanding Special Drawing Rights (SDRs) John Williamson US Interests and the International Monetary Fund C. Randall Henning A Solution for Europe’s Banking Problem Adam S. Posen and Nicolas Véron China’s Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implication Daniel H. Rosen and Thilo Hanemann India-Pakistan Trade: A Roadmap for Enhancing Economic Relations Mohsin S. Khan Pacific Asia and the Asia Pacific: The Choices for APEC C. Fred Bergsten The Economics of Energy Efficiency in Buildings Trevor Houser Setting the NAFTA Agenda on Climate Change Jeffrey J. Schott and Meera Fickling The 2008 Oil Price “Bubble” Mohsin S. Khan Why SDRs Could Rival the Dollar John Williamson The Future of the Dollar Richard N. Cooper The World Needs Further Monetary Ease, Not an Early Exit Joseph E. Gagnon The Winter of Their Discontent: Pyongyang Attacks the Market Stephan Haggard and Marcus Noland Notes on Equilibrium Exchange Rates: William R. Cline and John Williamson Confronting Asset Bubbles, Too Big to Fail, and Beggar-thy-Neighbor Exchange Rate Policies Morris Goldstein After the Flop in Copenhagen Gary Clyde Hufbauer and Jisun Kim Copenhagen, the Accord, and the Way Forward Trevor Houser The Substitution Account as a First Step Toward Reform of the International Monetary System Peter B. Kenen The Sustainability of China‘s Recovery from the Global Recession Nicholas R. Lardy New PPP-Based Estimates of Renminbi Undervaluation and Policy Implications Arvind Subramanian Protection by Stealth: Using the Tax Law to Discriminate against Foreign Insurance Companies Gary Clyde Hufbauer Higher Taxes on US-Based Multinationals Would Hurt US Workers and Exports Gary Clyde Hufbauer and Theodore H. Moran A Trade Agenda for the G-20 Jeffrey J. Schott

10-12 Assessing the American Power Act: The Economic, Employment, Energy Security and Environmental Impact of Senator Kerry and Senator Lieberman’s Discussion Draft Trevor Houser, Shashank Mohan, and Ian Hoffman 10-13 Hobbling Exports and Destroying Jobs Gary Clyde Hufbauer and Theodore H. Moran 10-14 In Defense of Europe’s Grand Bargain Jacob Funk Kirkegaard 10-15 Estimates of Fundamental Equilibrium Exchange Rates, May 2010 William R. Cline and John Williamson 10-16 Deepening China-Taiwan Relations through the Economic Cooperation Framework Agreement Daniel H. Rosen and Zhi Wang 10-17 The Big U-Turn: Japan Threatens to Reverse Postal Reforms Gary Clyde Hufbauer and Julia Muir 10-18 Dealing with Volatile Capital Flows Olivier Jeanne 10-19 Revisiting the NAFTA Agenda on Climate Change Jeffrey J. Schott and Meera Fickling 10-20 Renminbi Undervaluation, China’s Surplus, and the US Trade Deficit William R. Cline 10-21 The Road to a Climate Change Agreement Runs Through Montreal Richard J. Smith 10-22 Not All Financial Regulation Is Global Stéphane Rottier and Nicolas Véron 10-23 Prospects for Implementing the KoreaUS Free Trade Agreement Jeffrey J. Schott 10-24 The Central Banker’s Case for Doing More Adam S. Posen 10-25 Will It Be Brussels, Berlin, or Financial Markets that Check Moral Hazard in Europe’s Bailout Union? Most Likely the Latter! Jacob Funk Kirkegaard 10-26 Currency Wars? William R. Cline and John Williamson 10-27 How Europe Can Muddle Through Its Crisis Jacob Funk Kirkegaard 10-28 KORUS FTA 2.0: Assessing the Changes Jeffrey J. Schott 10-29 Strengthening IMF Surveillance: A Comprehensive Proposal Edwin M. Truman 10-30 An Update on EU Financial Reforms Nicolas Véron 11-1 Getting Surplus Countries to Adjust John Williamson 11-2 Corporate Tax Reform for a New Century Gary Clyde Hufbauer and Woan Foong Wong 11-3 The Elephant in the “Green Room”: China and the Doha Round Aaditya Mattoo, Francis Ng, and Arvind Subramanian

11-4

11-13

The Outlook for International Monetary System Reform in 2011: A Preliminary Report Card Edwin M. Truman Estimates of Fundamental Equilibrium Exchange Rates, May 2011 William R. Cline and John Williamson Revitalizing the Export-Import Bank Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong Logistics Reform for Low-Value Shipments Gary Clyde Hufbauer and Yee Wong What Should the United States Do about Doha? Jeffrey J. Schott Lessons from the East European Financial Crisis, 2008–10 Anders Åslund America’s Energy Security Options Trevor Houser and Shashank Mohan Keeping the Promise of Global Accounting Standards Nicolas Véron Markets vs. Malthus: Food Security and the Global Economy Cullen S. Hendrix Europe on the Brink Peter Boone and Simon Johnson

* = out of print

11-5 11-6 11-7 11-8 11-9 11-10 11-11 11-12

POLICY ANALYSES IN INTERNATIONAL ECONOMICS Series 1 2 3 4 5 6 7 8 9

The Lending Policies of the International Monetary Fund* John Williamson August 1982 ISBN 0-88132-000-5 “Reciprocity”: A New Approach to World Trade Policy?* William R. Cline September 1982 ISBN 0-88132-001-3 Trade Policy in the 1980s* C. Fred Bergsten and William R. Cline November 1982 ISBN 0-88132-002-1 International Debt and the Stability of the World Economy* William R. Cline September 1983 ISBN 0-88132-010-2 The Exchange Rate System,* 2d ed. John Williamson Sept. 1983, rev. June 1985 ISBN 0-88132-034X Economic Sanctions in Support of Foreign Policy Goals* Gary Clyde Hufbauer and Jeffrey J. Schott October 1983 ISBN 0-88132-014-5 A New SDR Allocation?* John Williamson March 1984 ISBN 0-88132-028-5 An International Standard for Monetary Stabilization* Ronald L. McKinnon March 1984 ISBN 0-88132-018-8 The Yen/Dollar Agreement: Liberalizing Japanese Capital Markets* Jeffrey Frankel December 1984 ISBN 0-88132-035-8

10 Bank Lending to Developing Countries: The Policy Alternatives* C. Fred Bergsten, William R. Cline, and John Williamson April 1985 ISBN 0-88132-032-3 11 Trading for Growth: The Next Round of Trade Negotiations* Gary Clyde Hufbauer and Jeffrey J. Schott September 1985 ISBN 0-88132-033-1 12 Financial Intermediation Beyond the Debt Crisis* Donald R. Lessard and John Williamson September 1985 ISBN 0-88132-021-8 13 The United States-Japan Economic Problem* C. Fred Bergsten and William R. Cline Oct. 1985, 2d ed. January 1987 ISBN 0-88132-060-9 14 Deficits and the Dollar: The World Economy at Risk* Stephen Marris Dec. 1985, 2d ed. November 1987 ISBN 0-88132-067-6 15 Trade Policy for Troubled Industries* Gary Clyde Hufbauer and Howard F. Rosen March 1986 ISBN 0-88132-020-X 16 The United States and Canada: The Quest for Free Trade* Paul Wonnacott, with an appendix by John Williamson March 1987 ISBN 0-88132-056-0 17 Adjusting to Success: Balance of Payments Policy in the East Asian NICs* Bela Balassa and John Williamson June 1987, rev. April 1990 ISBN 0-88132-101-X 18 Mobilizing Bank Lending to Debtor Countries* William R. Cline June 1987 ISBN 0-88132-062-5 19 Auction Quotas and United States Trade Policy* C. Fred Bergsten, Kimberly Ann Elliott, Jeffrey J. Schott, and Wendy E. Takacs September 1987 ISBN 0-88132-050-1 20 Agriculture and the GATT: Rewriting the Rules* Dale E. Hathaway September 1987 ISBN 0-88132-052-8 21 Anti-Protection: Changing Forces in United States Trade Politics* I. M. Destler and John S. Odell September 1987 ISBN 0-88132-043-9 22 Targets and Indicators: A Blueprint for the International Coordination of Economic Policy John Williamson and Marcus H. Miller September 1987 ISBN 0-88132-051-X 23 Capital Flight: The Problem and Policy Responses* Donald R. Lessard and John Williamson December 1987 ISBN 0-88132-059-5 24 United States-Canada Free Trade: An Evaluation of the Agreement* Jeffrey J. Schott April 1988 ISBN 0-88132-072-2 25 Voluntary Approaches to Debt Relief* John Williamson Sept. 1988, rev. May 1 ISBN 0-88132-098-6

26 American Trade Adjustment: The Global Impact* William R. Cline March 1989 ISBN 0-88132-095-1 27 More Free Trade Areas?* Jeffrey J. Schott May 1989 ISBN 0-88132-085-4 28 The Progress of Policy Reform in Latin America* John Williamson January 1990 ISBN 0-88132-100-1 29 The Global Trade Negotiations: What Can Be Achieved?* Jeffrey J. Schott September 1990 ISBN 0-88132-137-0 30 Economic Policy Coordination: Requiem for Prologue?* Wendy Dobson April 1991 ISBN 0-88132-102-8 31 The Economic Opening of Eastern Europe* John Williamson May 1991 ISBN 0-88132-186-9 32 Eastern Europe and the Soviet Union in the World Economy* Susan Collins and Dani Rodrik May 1991 ISBN 0-88132-157-5 33 African Economic Reform: The External Dimension* Carol Lancaster June 1991 ISBN 0-88132-096-X 34 Has the Adjustment Process Worked?* Paul R. Krugman October 1991 ISBN 0-88132-116-8 35 From Soviet DisUnion to Eastern Economic Community?* Oleh Havrylyshyn and John Williamson October 1991 ISBN 0-88132-192-3 36 Global Warming: The Economic Stakes* William R. Cline May 1992 ISBN 0-88132-172-9 37 Trade and Payments after Soviet Disintegration* John Williamson June 1992 ISBN 0-88132-173-7 38 Trade and Migration: NAFTA and Agriculture* Philip L. Martin October 1993 ISBN 0-88132-201-6 39 The Exchange Rate System and the IMF: A Modest Agenda Morris Goldstein June 1995 ISBN 0-88132-219-9 40 What Role for Currency Boards? John Williamson September 1995 ISBN 0-88132-222-9 41 Predicting External Imbalances for the United States and Japan* William R. Cline September 1995 ISBN 0-88132-220-2 42 Standards and APEC: An Action Agenda* John S. Wilson October 1995 ISBN 0-88132-223-7 43 Fundamental Tax Reform and Border Tax Adjustments* Gary Clyde Hufbauer January 1996 ISBN 0-88132-225-3 44 Global Telecom Talks: A Trillion Dollar Deal* Ben A. Petrazzini June 1996 ISBN 0-88132-230-X 45 WTO 2000: Setting the Course for World Trade Jeffrey J. Schott September 1996 ISBN 0-88132-234-2 46 The National Economic Council: A Work in Progress* I. M. Destler November 1996 ISBN 0-88132-239-3

47 The Case for an International Banking Standard Morris Goldstein April 1997 ISBN 0-88132-244-X 48 Transatlantic Trade: A Strategic Agenda* Ellen L. Frost May 1997 ISBN 0-88132-228-8 49 Cooperating with Europe’s Monetary Union C. Randall Henning May 1997 ISBN 0-88132-245-8 50 Renewing Fast Track Legislation* I. M. Destler September 1997 ISBN 0-88132-252-0 51 Competition Policies for the Global Economy Edward M. Graham and J. David Richardson November 1997 ISBN 0-88132-249-0 52 Improving Trade Policy Reviews in the World Trade Organization Donald Keesing April 1998 ISBN 0-88132-251-2 53 Agricultural Trade Policy: Completing the Reform Timothy Josling April 1998 ISBN 0-88132-256-3 54 Real Exchange Rates for the Year 2000 Simon Wren Lewis and Rebecca Driver April 1998 ISBN 0-88132-253-9 55 The Asian Financial Crisis: Causes, Cures, and Systemic Implications Morris Goldstein June 1998 ISBN 0-88132-261-X 56 Global Economic Effects of the Asian Currency Devaluations Marcus Noland, LiGang Liu, Sherman Robinson, and Zhi Wang July 1998 ISBN 0-88132-260-1 57 The Exchange Stabilization Fund: Slush Money or War Chest? C. Randall Henning May 1999 ISBN 0-88132-271-7 58 The New Politics of American Trade: Trade, Labor, and the Environment I. M. Destler and Peter J. Balint October 1999 ISBN 0-88132-269-5 59 Congressional Trade Votes: From NAFTA Approval to Fast Track Defeat Robert E. Baldwin and Christopher S. Magee February 2000 ISBN 0-88132-267-9 60 Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option John Williamson September 2000 ISBN 0-88132-293-8 61 NAFTA and the Environment: Seven Years Later Gary Clyde Hufbauer, Daniel Esty, Diana Orejas, Luis Rubio, and Jeffrey J. Schott October 2000 ISBN 0-88132-299-7 62 Free Trade between Korea and the United States? Inbom Choi and Jeffrey J. Schott April 2001 ISBN 0-88132-311-X 63 New Regional Trading Arrangements in the Asia Pacific? Robert Scollay and John P. Gilbert May 2001 ISBN 0-88132-302-0

64 Parental Supervision: The New Paradigm for Foreign Direct Investment and Development Theodore H. Moran August 2001 ISBN 0-88132-313-6 65 The Benefits of Price Convergence: Speculative Calculations Gary Clyde Hufbauer, Erika Wada, and Tony Warren December 2001 ISBN 0-88132-333-0 66 Managed Floating Plus Morris Goldstein March 2002 ISBN 0-88132-336-5 67 Argentina and the Fund: From Triumph to Tragedy Michael Mussa July 2002 ISBN 0-88132-339-X 68 East Asian Financial Cooperation C. Randall Henning September 2002 ISBN 0-88132-338-1 69 Reforming OPIC for the 21st Century Theodore H. Moran May 2003 ISBN 0-88132-342-X 70 Awakening Monster: The Alien Tort Statute of 1789 Gary Clyde Hufbauer and Nicholas Mitrokostas July 2003 ISBN 0-88132-366-7 71 Korea after Kim Jong-il Marcus Noland January 2004 ISBN 0-88132-373-X 72 Roots of Competitiveness: China‘s Evolving Agriculture Interests Daniel H. Rosen, Scott Rozelle, and Jikun Huang July 2004 ISBN 0-88132-376-4 73 Prospects for a US-Taiwan FTA Nicholas R. Lardy and Daniel H. Rosen December 2004 ISBN 0-88132-367-5 74 Anchoring Reform with a US-Egypt Free Trade Agreement Ahmed Galal and Robert Z. Lawrence April 2005 ISBN 0-88132-368-3 75 Curbing the Boom-Bust Cycle: Stabilizing Capital Flows to Emerging Markets John Williamson July 2005 ISBN 0-88132-330-6 76 The Shape of a Swiss-US Free Trade Agreement Gary Clyde Hufbauer and Richard E. Baldwin February 2006 ISBN 978-0-88132-385-6 77 A Strategy for IMF Reform Edwin M. Truman February 2006 ISBN 978-0-88132-398-6 78 US-China Trade Disputes: Rising Tide, Rising Stakes Gary Clyde Hufbauer, Yee Wong, and Ketki Sheth August 2006 ISBN 978-0-88132-394-8 79 Trade Relations Between Colombia and the United States Jeffrey J. Schott, ed. August 2006 ISBN 978-0-88132-389-4 80 Sustaining Reform with a US-Pakistan Free Trade Agreement Gary Clyde Hufbauer and Shahid Javed Burki November 2006 ISBN 978-0-88132-395-5 81 A US–Middle East Trade Agreement: A Circle of Opportunity? Robert Z. Lawrence November 2006 ISBN 978-0-88132-396-2

82 Reference Rates and the International Monetary System John Williamson January 2007 ISBN 978-0-88132-401-3 83 Toward a US-Indonesia Free Trade Agreement Gary Clyde Hufbauer and Sjamsu Rahardja June 2007 ISBN 978-0-88132-402-0 84 The Accelerating Decline in America‘s High-Skilled Workforce Jacob Funk Kirkegaard December 2007 ISBN 978-0-88132-413-6 85 Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality? Robert Z. Lawrence January 2008 ISBN 978-0-88132-414-3 86 Maghreb Regional and Global Integration: A Dream to Be Fulfilled Gary Clyde Hufbauer and Claire Brunel, eds. October 2008 ISBN 978-0-88132-426-6 87 The Future of China‘s Exchange Rate Policy Morris Goldstein and Nicholas R. Lardy July 2009 ISBN 978-0-88132-416-7 88 Capitalizing on the Morocco-US Free Trade Agreement: A Road Map for Success Gary Clyde Hufbauer and Claire Brunel, eds September 2009 ISBN 978-0-88132-433-4 89 Three Threats: An Analytical Framework for the CFIUS Process Theodore H. Moran August 2009 ISBN 978-0-88132-429-7 90 Reengaging Egypt: Options for US-Egypt Economic Relations Barbara Kotschwar and Jeffrey J. Schott January 2010 ISBN 978-088132-439-6 91 Figuring Out the Doha Round Gary Clyde Hufbauer, Jeffrey J. Schott, and Woan Foong Wong June 2010 ISBN 978-088132-503-4 92 China’s Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities Theodore H. Moran June 2010 ISBN 978-088132-512-6 93 The Implications of China-Taiwan Economic Liberalization Daniel H. Rosen and Zhi Wang January 2011 ISBN 978-0-88132-501-0 94 The Global Outlook for Government Debt over the Next 25 Years: Implications for the Economy and Public Policy Joseph E. Gagnon with Marc Hinterschweiger June 2011 ISBN 978-0-88132-621-5 95 A Decade of Debt Carmen M. Reinhart and Kenneth S. Rogoff September 2011 ISBN 978-0-88132-622-2 96 Carbon Abatement Costs and Climate Change Finance William R. Cline July 2010 ISBN 978-0-88132-607-9 BOOKS IMF Conditionality* John Williamson, ed. 1983 ISBN 0-88132-006-4 Trade Policy in the 1980s* William R. Cline, ed. 1983 ISBN 0-88132-031-5

Subsidies in International Trade* Gary Clyde Hufbauer and Joanna Shelton Erb 1984 ISBN 0-88132-004-8 International Debt: Systemic Risk and Policy Response* William R. Cline 1984 ISBN 0-88132-015-3 Trade Protection in the United States: 31 Case Studies* Gary Clyde Hufbauer, Diane E. Berliner, and Kimberly Ann Elliott 1986 ISBN 0-88132-040-4 Toward Renewed Economic Growth in Latin America* Bela Balassa, Gerardo M. Bueno, Pedro Pablo Kuczynski, and Mario Henrique Simonsen 1986 ISBN 0-88132-045-5 Capital Flight and Third World Debt* Donald R. Lessard and John Williamson, eds. 1987 ISBN 0-88132-053-6 The Canada-United States Free Trade Agreement: The Global Impact* Jeffrey J. Schott and Murray G. Smith, eds. 1988 ISBN 0-88132-073-0 World Agricultural Trade: Building a Consensus* William M. Miner and Dale E. Hathaway, eds. 1988 ISBN 0-88132-071-3 Japan in the World Economy* Bela Balassa and Marcus Noland 1988 ISBN 0-88132-041-2 America in the World Economy: A Strategy for the 1990s* C. Fred Bergsten 1988 ISBN 0-88132-089-7 Managing the Dollar: From the Plaza to the Louvre* Yoichi Funabashi 1988, 2d ed. 1989 ISBN 0-88132-097-8 United States External Adjustment and the World Economy* William R. Cline May 1989 ISBN 0-88132-048-X Free Trade Areas and U.S. Trade Policy* Jeffrey J. Schott, ed. May 1989 ISBN 0-88132-094-3 Dollar Politics: Exchange Rate Policymaking in the United States* I. M. Destler and C. Randall Henning September 1989 ISBN 0-88132-079-X Latin American Adjustment: How Much Has Happened?* John Williamson, ed. April 1990 ISBN 0-88132-125-7 The Future of World Trade in Textiles and Apparel* William R. Cline 1987, 2d ed. June 1999 ISBN 0-88132-110-9 Completing the Uruguay Round: A ResultsOriented Approach to the GATT Trade Negotiations* Jeffrey J. Schott, ed. September 1990 ISBN 0-88132-130-3 Economic Sanctions Reconsidered (2 volumes) Economic Sanctions Reconsidered: Supplemental Case Histories Gary Clyde Hufbauer, Jeffrey J. Schott, and Kimberly Ann Elliott 1985, 2d ed. Dec. 1990 ISBN cloth 0-88132-115-X ISBN paper 0-88132-105-2

Economic Sanctions Reconsidered: History and Current Policy Gary Clyde Hufbauer, Jeffrey J. Schott, and Kimberly Ann Elliott December 1990 ISBN cloth 0-88132-140-0 ISBN paper 0-88132-136-2 Pacific Basin Developing Countries: Prospects for the Future* Marcus Noland January 1991 ISBN cloth 0-88132-141-9 ISBN paper 0-88132-081-1 Currency Convertibility in Eastern Europe* John Williamson, ed. October 1991 ISBN 0-88132-128-1 International Adjustment and Financing: The Lessons of 1985-1991* C. Fred Bergsten, ed. January 1992 ISBN 0-88132-112-5 North American Free Trade: Issues and Recommendations* Gary Clyde Hufbauer and Jeffrey J. Schott ISBN 0-88132-120-6 April 1992 Narrowing the U.S. Current Account Deficit* Alan J. Lenz June 1992 ISBN 0-88132-103-6 The Economics of Global Warming William R. Cline June 1992 ISBN 0-88132-132-X US Taxation of International Income: Blueprint for Reform Gary Clyde Hufbauer, assisted by Joanna M. van Rooij ISBN 0-88132-134-6 October 1992 Who’s Bashing Whom? Trade Conflict in HighTechnology Industries Laura D’Andrea Tyson November 1992 ISBN 0-88132-106-0 Korea in the World Economy* Il SaKong ISBN 0-88132-183-4 January 1993 Pacific Dynamism and the International Economic System* C. Fred Bergsten and Marcus Noland, eds. ISBN 0-88132-196-6 May 1993 Economic Consequences of Soviet Disintegration* John Williamson, ed. May 1993 ISBN 0-88132-190-7 Reconcilable Differences? United States-Japan Economic Conflict* C. Fred Bergsten and Marcus Noland June 1993 ISBN 0-88132-129-X Does Foreign Exchange Intervention Work? Kathryn M. Dominguez and Jeffrey A. Frankel September 1993 ISBN 0-88132-104-4 Sizing Up U.S. Export Disincentives* J. David Richardson September 1993 ISBN 0-88132-107-9 NAFTA: An Assessment Gary Clyde Hufbauer and Jeffrey J. Schott, rev. ed. October 1993 ISBN 0-88132-199-0 Adjusting to Volatile Energy Prices Philip K. Verleger, Jr. November 1993 ISBN 0-88132-069-2 The Political Economy of Policy Reform John Williamson, ed. January 1994 ISBN 0-88132-195-8 Measuring the Costs of Protection in the United States Gary Clyde Hufbauer and Kimberly Ann Elliott January 1994 ISBN 0-88132-108-7

The Dynamics of Korean Economic Development* Cho Soon March 1994 ISBN 0-88132-162-1 Reviving the European Union* C. Randall Henning, Eduard Hochreiter, and Gary Clyde Hufbauer, eds. April 1994 ISBN 0-88132-208-3 China in the World Economy Nicholas R. Lardy April 1994 ISBN 0-88132-200-8 Greening the GATT: Trade, Environment, and the Future Daniel C. Esty ISBN 0-88132-205-9 July 1994 Western Hemisphere Economic Integration* Gary Clyde Hufbauer and Jeffrey J. Schott July 1994 ISBN 0-88132-159-1 Currencies and Politics in the United States, Germany, and Japan C. Randall Henning September 1994 ISBN 0-88132-127-3 Estimating Equilibrium Exchange Rates John Williamson, ed. September 1994 ISBN 0-88132-076-5 Managing the World Economy: Fifty Years after Bretton Woods Peter B. Kenen, ed. September 1994 ISBN 0-88132-212-1 Reciprocity and Retaliation in U.S. Trade Policy Thomas O. Bayard and Kimberly Ann Elliott ISBN 0-88132-084-6 September 1994 The Uruguay Round: An Assessment* Jeffrey J. Schott, assisted by Johanna Buurman November 1994 ISBN 0-88132-206-7 Measuring the Costs of Protection in Japan* Yoko Sazanami, Shujiro Urata, and Hiroki Kawai January 1995 ISBN 0-88132-211-3 Foreign Direct Investment in the United States, 3d ed. Edward M. Graham and Paul R. Krugman ISBN 0-88132-204-0 January 1995 The Political Economy of Korea-United States Cooperation* C. Fred Bergsten and Il SaKong, eds. February 1995 ISBN 0-88132-213-X International Debt Reexamined* William R. Cline February 1995 ISBN 0-88132-083-8 American Trade Politics, 3d ed. I. M. Destler April 1995 ISBN 0-88132-215-6 Managing Official Export Credits: The Quest for a Global Regime* John E. Ray July 1995 ISBN 0-88132-207-5 Asia Pacific Fusion: Japan’s Role in APEC* Yoichi Funabashi October 1995 ISBN 0-88132-224-5 Korea-United States Cooperation in the New World Order* C. Fred Bergsten and Il SaKong, eds. February 1996 ISBN 0-88132-226-1 Why Exports Really Matter!* ISBN 0-88132-221-0 Why Exports Matter More!* ISBN 0-88132-229-6 J. David Richardson and Karin Rindal July 1995; February 1996

Global Corporations and National Governments Edward M. Graham May 1996 ISBN 0-88132-111-7 Global Economic Leadership and the Group of Seven C. Fred Bergsten and C. Randall Henning May 1996 ISBN 0-88132-218-0 The Trading System after the Uruguay Round* John Whalley and Colleen Hamilton July 1996 ISBN 0-88132-131-1 Private Capital Flows to Emerging Markets after the Mexican Crisis* Guillermo A. Calvo, Morris Goldstein, and Eduard Hochreiter September 1996 ISBN 0-88132-232-6 The Crawling Band as an Exchange Rate Regime: Lessons from Chile, Colombia, and Israel John Williamson September 1996 ISBN 0-88132-231-8 Flying High: Liberalizing Civil Aviation in the Asia Pacific* Gary Clyde Hufbauer and Christopher Findlay November 1996 ISBN 0-88132-227-X Measuring the Costs of Visible Protection in Korea* Namdoo Kim November 1996 ISBN 0-88132-236-9 The World Trading System: Challenges Ahead Jeffrey J. Schott December 1996 ISBN 0-88132-235-0 Has Globalization Gone Too Far? Dani Rodrik March 1997 ISBN paper 0-88132-241-5 Korea-United States Economic Relationship* C. Fred Bergsten and Il SaKong, eds. March 1997 ISBN 0-88132-240-7 Summitry in the Americas: A Progress Report Richard E. Feinberg April 1997 ISBN 0-88132-242-3 Corruption and the Global Economy Kimberly Ann Elliott June 1997 ISBN 0-88132-233-4 Regional Trading Blocs in the World Economic System Jeffrey A. Frankel October 1997 ISBN 0-88132-202-4 Sustaining the Asia Pacific Miracle: Environmental Protection and Economic Integration Andre Dua and Daniel C. Esty October 1997 ISBN 0-88132-250-4 Trade and Income Distribution William R. Cline November 1997 ISBN 0-88132-216-4 Global Competition Policy Edward M. Graham and J. David Richardson December 1997 ISBN 0-88132-166-4 Unfinished Business: Telecommunications after the Uruguay Round Gary Clyde Hufbauer and Erika Wada December 1997 ISBN 0-88132-257-1 Financial Services Liberalization in the WTO Wendy Dobson and Pierre Jacquet June 1998 ISBN 0-88132-254-7 Restoring Japan’s Economic Growth Adam S. Posen September 1998 ISBN 0-88132-262-8

Measuring the Costs of Protection in China Zhang Shuguang, Zhang Yansheng, and Wan Zhongxin November 1998 ISBN 0-88132-247-4 Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition Theodore H. Moran December 1998 ISBN 0-88132-258-X Behind the Open Door: Foreign Enterprises in the Chinese Marketplace Daniel H. Rosen January 1999 ISBN 0-88132-263-6 Toward A New International Financial Architecture: A Practical Post-Asia Agenda Barry Eichengreen February 1999 ISBN 0-88132-270-9 Is the U.S. Trade Deficit Sustainable? Catherine L. Mann September 1999 ISBN 0-88132-265-2 Safeguarding Prosperity in a Global Financial System: The Future International Financial Architecture, Independent Task Force Report Sponsored by the Council on Foreign Relations Morris Goldstein, Project Director October 1999 ISBN 0-88132-287-3 Avoiding the Apocalypse: The Future of the Two Koreas Marcus Noland June 2000 ISBN 0-88132-278-4 Assessing Financial Vulnerability: An Early Warning System for Emerging Markets Morris Goldstein, Graciela Kaminsky, and Carmen Reinhart June 2000 ISBN 0-88132-237-7 Global Electronic Commerce: A Policy Primer Catherine L. Mann, Sue E. Eckert, and Sarah Cleeland Knight July 2000 ISBN 0-88132-274-1 The WTO after Seattle Jeffrey J. Schott, ed. July 2000 ISBN 0-88132-290-3 Intellectual Property Rights in the Global Economy Keith E. Maskus August 2000 ISBN 0-88132-282-2 The Political Economy of the Asian Financial Crisis Stephan Haggard August 2000 ISBN 0-88132-283-0 Transforming Foreign Aid: United States Assistance in the 21st Century Carol Lancaster ISBN 0-88132-291-1 August 2000 Fighting the Wrong Enemy: Antiglobal Activists and Multinational Enterprises Edward M. Graham September 2000 ISBN 0-88132-272-5 Globalization and the Perceptions of American Workers Kenneth Scheve and Matthew J. Slaughter March 2001 ISBN 0-88132-295-4 World Capital Markets: Challenge to the G-10 Wendy Dobson and Gary Clyde Hufbauer, assisted by Hyun Koo Cho May 2001 ISBN 0-88132-301-2 Prospects for Free Trade in the Americas Jeffrey J. Schott August 2001 ISBN 0-88132-275-X

Toward a North American Community: Lessons from the Old World for the New Robert A. Pastor August 2001 ISBN 0-88132-328-4 Measuring the Costs of Protection in Europe: European Commercial Policy in the 2000s Patrick A. Messerlin September 2001 ISBN 0-88132-273-3 Job Loss from Imports: Measuring the Costs Lori G. Kletzer September 2001 ISBN 0-88132-296-2 No More Bashing: Building a New Japan– United States Economic Relationship C. Fred Bergsten, Takatoshi Ito, and Marcus Noland October 2001 ISBN 0-88132-286-5 Why Global Commitment Really Matters! Howard Lewis III and J. David Richardson October 2001 ISBN 0-88132-298-9 Leadership Selection in the Major Multilaterals Miles Kahler November 2001 ISBN 0-88132-335-7 The International Financial Architecture: What’s New? What’s Missing? Peter B. Kenen November 2001 ISBN 0-88132-297-0 Delivering on Debt Relief: From IMF Gold to a New Aid Architecture John Williamson and Nancy Birdsall, with Brian Deese April 2002 ISBN 0-88132-331-4 Imagine There’s No Country: Poverty, Inequality, and Growth in the Era of Globalization Surjit S. Bhalla ISBN 0-88132-348-9 September 2002 Reforming Korea’s Industrial Conglomerates Edward M. Graham January 2003 ISBN 0-88132-337-3 Industrial Policy in an Era of Globalization: Lessons from Asia Marcus Noland and Howard Pack March 2003 ISBN 0-88132-350-0 Reintegrating India with the World Economy T. N. Srinivasan and Suresh D. Tendulkar March 2003 ISBN 0-88132-280-6 After the Washington Consensus: Restarting Growth and Reform in Latin America Pedro-Pablo Kuczynski and John Williamson, eds. March 2003 ISBN 0-88132-347-0 The Decline of US Labor Unions and the Role of Trade Robert E. Baldwin June 2003 ISBN 0-88132-341-1 Can Labor Standards Improve under Globalization? Kimberly Ann Elliott and Richard B. Freeman June 2003 ISBN 0-88132-332-2 Crimes and Punishments? Retaliation under the WTO Robert Z. Lawrence October 2003 ISBN 0-88132-359-4 Inflation Targeting in the World Economy Edwin M. Truman October 2003 ISBN 0-88132-345-4 Foreign Direct Investment and Tax Competition John H. Mutti November 2003 ISBN 0-88132-352-7

Has Globalization Gone Far Enough? The Costs of Fragmented Markets Scott C. Bradford and Robert Z. Lawrence February 2004 ISBN 0-88132-349-7 Food Regulation and Trade: Toward a Safe and Open Global System Tim Josling, Donna Roberts, and David Orden March 2004 ISBN 0-88132-346-2 Controlling Currency Mismatches in Emerging Markets Morris Goldstein and Philip Turner April 2004 ISBN 0-88132-360-8 Free Trade Agreements: US Strategies and Priorities Jeffrey J. Schott, ed. ISBN 0-88132-361-6 April 2004 Trade Policy and Global Poverty William R. Cline June 2004 ISBN 0-88132-365-9 Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies Nouriel Roubini and Brad Setser August 2004 ISBN 0-88132-371-3 Transforming the European Economy Martin Neil Baily and Jacob Funk Kirkegaard September 2004 ISBN 0-88132-343-8 Chasing Dirty Money: The Fight Against Money Laundering Peter Reuter and Edwin M. Truman November 2004 ISBN 0-88132-370-5 The United States and the World Economy: Foreign Economic Policy for the Next Decade C. Fred Bergsten January 2005 ISBN 0-88132-380-2 Does Foreign Direct Investment Promote Development? Theodore H. Moran, Edward M. Graham, and Magnus Blomström, eds. April 2005 ISBN 0-88132-381-0 American Trade Politics, 4th ed. I. M. Destler June 2005 ISBN 0-88132-382-9 Why Does Immigration Divide America? Public Finance and Political Opposition to Open Borders Gordon H. Hanson August 2005 ISBN 0-88132-400-0 Reforming the US Corporate Tax Gary Clyde Hufbauer and Paul L. E. Grieco September 2005 ISBN 0-88132-384-5 The United States as a Debtor Nation William R. Cline September 2005 ISBN 0-88132-399-3 NAFTA Revisited: Achievements and Challenges Gary Clyde Hufbauer and Jeffrey J. Schott, assisted by Paul L. E. Grieco and Yee Wong October 2005 ISBN 0-88132-334-9 US National Security and Foreign Direct Investment Edward M. Graham and David M. Marchick May 2006 ISBN 978-0-88132-391-7 Accelerating the Globalization of America: The Role for Information Technology Catherine L. Mann, assisted by Jacob Funk Kirkegaard June 2006 ISBN 978-0-88132-390-0

Delivering on Doha: Farm Trade and the Poor Kimberly Ann Elliott July 2006 ISBN 978-0-88132-392-4 Case Studies in US Trade Negotiation, Vol. 1: Making the Rules Charan Devereaux, Robert Z. Lawrence, and Michael Watkins September 2006 ISBN 978-0-88132-362-7 Case Studies in US Trade Negotiation, Vol. 2: Resolving Disputes Charan Devereaux, Robert Z. Lawrence, and Michael Watkins September 2006 ISBN 978-0-88132-363-2 C. Fred Bergsten and the World Economy Michael Mussa, ed. December 2006 ISBN 978-0-88132-397-9 Working Papers, Volume I Peterson Institute December 2006 ISBN 978-0-88132-388-7 The Arab Economies in a Changing World Marcus Noland and Howard Pack April 2007 ISBN 978-0-88132-393-1 Working Papers, Volume II Peterson Institute April 2007 ISBN 978-0-88132-404-4 Global Warming and Agriculture: Impact Estimates by Country William R. Cline July 2007 ISBN 978-0-88132-403-7 US Taxation of Foreign Income Gary Clyde Hufbauer and Ariel Assa October 2007 ISBN 978-0-88132-405-1 Russia‘s Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed Anders Åslund October 2007 ISBN 978-0-88132-409-9 Economic Sanctions Reconsidered, 3d ed. Gary Clyde Hufbauer, Jeffrey J. Schott, Kimberly Ann Elliott, and Barbara Oegg November 2007 ISBN hardcover 978-0-88132-407-5 ISBN hardcover/CD-ROM 978-0-88132-408-2 Debating China’s Exchange Rate Policy Morris Goldstein and Nicholas R. Lardy, eds. April 2008 ISBN 978-0-88132-415-0 Leveling the Carbon Playing Field: International Competition and US Climate Policy Design Trevor Houser, Rob Bradley, Britt Childs, Jacob Werksman, and Robert Heilmayr May 2008 ISBN 978-0-88132-420-4 Accountability and Oversight of US Exchange Rate Policy C. Randall Henning June 2008 ISBN 978-0-88132-419-8 Challenges of Globalization: Imbalances and Growth Anders Åslund and Marek Dabrowski, eds. July 2008 ISBN 978-0-88132-418-1 China’s Rise: Challenges and Opportunities C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell September 2008 ISBN 978-0-88132-417-4 Banking on Basel: The Future of International Financial Regulation Daniel K. Tarullo September 2008 ISBN 978-0-88132-423-5 US Pension Reform: Lessons from Other Countries Martin Neil Baily and Jacob Funk Kirkegaard February 2009 ISBN 978-0-88132-425-9

How Ukraine Became a Market Economy and Democracy Anders Åslund March 2009 ISBN 978-0-88132-427-3 Global Warming and the World Trading System Gary Clyde Hufbauer, Steve Charnovitz, and Jisun Kim March 2009 ISBN 978-0-88132-428-0 The Russia Balance Sheet Anders Åslund and Andrew Kuchins March 2009 ISBN 978-0-88132-424-2 The Euro at Ten: The Next Global Currency? Jean Pisani-Ferry and Adam S. Posen, eds. July 2009 ISBN 978-0-88132-430-3 Financial Globalization, Economic Growth, and the Crisis of 2007–09 William R. Cline May 2010 ISBN 978-0-88132-4990-0 Russia after the Global Economic Crisis Anders Åslund, Sergei Guriev, and Andrew Kuchins, eds. June 2010 ISBN 978-0-88132-497-6 Sovereign Wealth Funds: Threat or Salvation? Edwin M. Truman September 2010 ISBN 978-0-88132-498-3 The Last Shall Be the First: The East European Financial Crisis, 2008–10 Anders Åslund October 2010 ISBN 978-0-88132-521-8 Witness to Transformation: Refugee Insights into North Korea Stephan Haggard and Marcus Noland January 2011 ISBN 978-0-88132-438-9 Foreign Direct Investment and Development: Launching a Second Generation of Policy Research, Avoiding the Mistakes of the First, Reevaluating Policies for Developed and Developing Countries Theodore H. Moran April 2011 ISBN 978-0-88132-600-0 How Latvia Came through the Financial Crisis Anders Åslund and Valdis Dombrovskis May 2011 ISBN 978-0-88132-602-4 Global Trade in Services: Fear, Facts, and Offshoring J. Bradford Jensen August 2011 ISBN 978-0-88132-601-7 SPECIAL REPORTS 1 2 3 4 5

Promoting World Recovery: A Statement on Global Economic Strategy* by 26 Economists from Fourteen Countries December 1982 ISBN 0-88132-013-7 Prospects for Adjustment in Argentina, Brazil, and Mexico: Responding to the Debt Crisis* John Williamson, ed. June 1983 ISBN 0-88132-016-1 Inflation and Indexation: Argentina, Brazil, and Israel* John Williamson, ed. March 1985 ISBN 0-88132-037-4 Global Economic Imbalances* C. Fred Bergsten, ed. March 1986 ISBN 0-88132-042-0 African Debt and Financing* Carol Lancaster and John Williamson, eds. May 1986 ISBN 0-88132-044-7

6 7 8 9 10 11 12 13 14 15 16 17

Resolving the Global Economic Crisis: After Wall Street* by Thirty-three Economists from Thirteen Countries December 1987 ISBN 0-88132-070-6 World Economic Problems* Kimberly Ann Elliott and John Williamson, eds. April 1988 ISBN 0-88132-055-2 Reforming World Agricultural Trade* by Twenty-nine Professionals from Seventeen Countries 1988 ISBN 0-88132-088-9 Economic Relations Between the United States and Korea: Conflict or Cooperation?* Thomas O. Bayard and Soogil Young, eds. January 1989 ISBN 0-88132-068-4 Whither APEC? The Progress to Date and Agenda for the Future* C. Fred Bergsten, ed. October 1997 ISBN 0-88132-248-2 Economic Integration of the Korean Peninsula Marcus Noland, ed. January 1998 ISBN 0-88132-255-5 Restarting Fast Track* Jeffrey J. Schott, ed. April 1998 ISBN 0-88132-259-8 Launching New Global Trade Talks: An Action Agenda Jeffrey J. Schott, ed. September 1998 ISBN 0-88132-266-0 Japan’s Financial Crisis and Its Parallels to US Experience Ryoichi Mikitani and Adam S. Posen, eds. September 2000 ISBN 0-88132-289-X The Ex-Im Bank in the 21st Century: A New Approach Gary Clyde Hufbauer and Rita M. Rodriguez, eds. January 2001 ISBN 0-88132-300-4 The Korean Diaspora in the World Economy C. Fred Bergsten and Inbom Choi, eds. January 2003 ISBN 0-88132-358-6 Dollar Overvaluation and the World Economy C. Fred Bergsten and John Williamson, eds. February 2003 ISBN 0-88132-351-9 Dollar Adjustment: How Far? Against What? C. Fred Bergsten and John Williamson, eds. November 2004 ISBN 0-88132-378-0

18 The Euro at Five: Ready for a Global Role? Adam S. Posen, ed. April 2005 ISBN 0-88132-380-2 19 Reforming the IMF for the 21st Century Edwin M. Truman, ed. April 2006 ISBN 978-0-88132-387-0 20 The Long-Term International Economic Position of the United States C. Fred Bergsten, ed. May 2009 ISBN 978-0-88132-432-7 WORKS IN PROGRESS China’s Energy Evolution: The Consequences of Powering Growth at Home and Abroad Daniel H. Rosen and Trevor Houser Global Identity Theft: Economic and Policy Implications Catherine L. Mann Globalized Venture Capital: Implications for US Entrepreneurship and Innovation Catherine L. Mann Forging a Grand Bargain: Expanding Trade and Raising Worker Prosperity Lori G. Kletzer, J. David Richardson, and Howard F. Rosen Why Reform a Rich Country? Germany and the Future of Capitalism Adam S. Posen Global Forces, American Faces: US Economic Globalization at the Grass Roots J. David Richardson Policy Reform in Rich Countries John Williamson, ed. Banking System Fragility in Emerging Economies Morris Goldstein and Philip Turner Aligning NAFTA with Climate Change Objectives Meera Fickling and Jeffrey J. Schott Private Rights and Public Problems: The Global Economics of Intellectual Property in the 21st Century Keith Maskus The Positive Agenda for Climate Change and Trade Trevor Houser, Jacob Funk Kirkegaard, and Rob Bradley Flexible Exchange Rates for a Stable World Economy Joseph E. Gagnon

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Mexico, Central America, South America, and Puerto Rico US PubRep, Inc. 311 Dean Drive Rockville, MD 20851 Tel: 301-838-9276 Fax: 301-838-9278 Email: [email protected]

Middle East MERIC 2 Bahgat Ali Street, El Masry Towers Tower D, Apt. 24 Zamalek, Cairo Egypt Tel. 20-2-7633824 Fax: 20-2-7369355 Email: [email protected] www.mericonline.com

Asia (Brunei, Burma, Cambodia, China, Hong Kong, Indonesia, Korea, Laos, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam) East-West Export Books (EWEB) University of Hawaii Press 2840 Kolowalu Street Honolulu, Hawaii 96822-1888 Tel: 808-956-8830 Fax: 808-988-6052 Email: [email protected]

United Kingdom, Europe (including Russia and Turkey), Africa, and Israel The Eurospan Group c/o Turpin Distribution Pegasus Drive Stratton Business Park Biggleswade, Bedfordshire SG18 8TQ United Kingdom Tel: 44 (0) 1767-604972 Fax: 44 (0) 1767-601640 Email: [email protected] www.eurospangroup.com/bookstore

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