Countries that let their debt loads get high risk losing control of their own fiscal sustainability, through an adverse feedback loop in which doubts by lenders lead to higher government bond rates, which in turn make debt problems more severe.
Responses
Responses weighted by each expert's confidence
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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This is generically true, but we don't the threshold where it matters. And not clearly true for countries that borrow in their own currency.
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Bio/Vote History | ||
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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"Risk" is the operative word here; it is hard to forecast ex ante at what point the negative feedback loop will become problematic.
-see background information here |
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 Janet Currie |
Princeton | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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Lots of particulars matter, including who it is owed to and whether the country has its own currency.
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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In perfect transparent markets, the market clears at an appropriate yield in one step. In actuality, price discovery involves feedback.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Does gravity make bricks fall when dropped?
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Much depends on other factors like growth of the denominator of the debt/GDP ratio, which will vary with policies & circumstances.
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Claudia Goldin |
Harvard | Bio/Vote History | ||
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 Austan Goolsbee |
Chicago | Did Not Answer | Bio/Vote History | |
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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Tough question is definition of "high". See Rogoff/Reinhardt for best evidence. Does "high" differ for country w global currency, like US?
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 Robert Hall |
Stanford | Bio/Vote History | ||
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Simple math...interesting that it has not happened to Japan, however.
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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The debt load may be a factor in reputation but the US has experienced great increases in debt in the past without suffering these problems.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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The only question is when the tipping point kicks in. Japan will face trouble after Europe is sorted out, as might the UK and maybe then US
-see background information here |
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 Pete Klenow |
Stanford | Bio/Vote History | ||
 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Yes, but clearly conditions vary - right now US can borrow easily with high debt, but some euro countries cannot.
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Government vulnerability will depend on the maturity of its debt (more short term debt means more exposure) and the size of its deficit.
-see background information here |
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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 Hyun Song Shin |
Princeton | Bio/Vote History | ||
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 Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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With debt/GDP around unity, a substantial risk premium can be the difference between the debt load being "sustainable" and "unsustainable."
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Yes I suppose so, but what of it?
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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 Luigi Zingales |
Chicago Booth | Bio/Vote History | ||
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