But it appears as though the country has at least 10 years of debt-GDP ratios that are lower--sometimes considerably lower--than ratios that are common in Japan, many developed European economies, and in emerging markets.
Small changes in large programs can have a significant effect on future debt-GDP ratios.
Keywords: fiscal policy, federal debt, interest costs, debt-GDP ratio, health costs, entitlements
Even while the deficit is relatively low, it is not low enough to lower the debt-GDP ratio significantly.
We find that the negative relationship between debt and GDP growth is influenced by outliers or exceptionally high debt-GDP ratios.
To reinforce this point we construct bar diagrams with median debt-GDP ratios and median growth rates for different sub-periods in Figure 2.
As growth declines, debt-GDP ratio rises, so the causality may run from low growth to high debt-GDP ratios.
For example, high public debt could be used to improve schooling which is found to have a larger positive impact on growth than the estimated negative impact of public debt-GDP ratios.
The country has long coped with similar debt-GDP ratios
for some 20 years after profligate government spending in the 1980s.
In the next section we develop and estimate a simple macroeconomic model to determine the effects of monetary, fiscal, and exchange rate policies, on foreign debt and debt-GDP ratios of Costa Rica, El Salvador, Guatemala, and Honduras.
We may then identify the appropriate policy mix to be used to achieve acceptable levels of foreign debt and debt-GDP ratios.
For the remaining countries, changes in the money supply did not significantly affect their foreign debt position or their debt-GDP ratios.