Tuesday, April 09, 2013 10:25am

High Debt Countries

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
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel
Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Strongly Agree 7
Bio/Vote History
         
Alesina Alberto Alesina Harvard Strongly Agree 10
Bio/Vote History
         
Altonji Joseph Altonji Yale Agree 7
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Agree 7
Bio/Vote History
         
Autor David Autor MIT Agree 6
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.
Bio/Vote History
         
Baicker Katherine Baicker Harvard Agree 3
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Strongly Agree 3
Bio/Vote History
         
Chetty Raj Chetty Harvard Agree 4
Bio/Vote History
         
Chevalier Judith Chevalier Yale Strongly Agree 8
"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
Bio/Vote History
         
Currie Janet Currie Princeton Agree 4
Bio/Vote History
         
Cutler David Cutler Harvard Agree 3
Lots of particulars matter, including who it is owed to and whether the country has its own currency.
Bio/Vote History
         
Deaton Angus Deaton Princeton Strongly Agree 7
Bio/Vote History
         
Duffie Darrell Duffie Stanford Strongly Agree 10
In perfect transparent markets, the market clears at an appropriate yield in one step. In actuality, price discovery involves feedback.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Strongly Agree 10
Does gravity make bricks fall when dropped?
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 7
Much depends on other factors like growth of the denominator of the debt/GDP ratio, which will vary with policies & circumstances.
Bio/Vote History
         
Fair Ray Fair Yale Strongly Agree 5
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Agree 6
Bio/Vote History
         
Goldin Claudia Goldin Harvard No Opinion
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Did Not Answer
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Agree 7
Tough question is definition of "high". See Rogoff/Reinhardt for best evidence. Does "high" differ for country w global currency, like US?
Bio/Vote History
         
Hall Robert Hall Stanford Strongly Agree 8
Simple math...interesting that it has not happened to Japan, however.
Bio/Vote History
         
Holmström Bengt Holmström MIT Agree 8
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Agree 9
Bio/Vote History
         
Judd Kenneth Judd Stanford Agree 4
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.
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Strongly Agree 9
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
Bio/Vote History
         
Klenow Pete Klenow Stanford Strongly Agree 7 Bio/Vote History
         
Levin Jonathan Levin Stanford Agree 6
Yes, but clearly conditions vary - right now US can borrow easily with high debt, but some euro countries cannot.
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 8
Bio/Vote History
         
Nordhaus William Nordhaus Yale Agree 7
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Strongly Agree 10
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
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Uncertain 5
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Did Not Answer
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Agree 3
Bio/Vote History
         
Shin Hyun Song Shin Princeton Agree 7
Bio/Vote History
         
Stokey Nancy Stokey Chicago Strongly Agree 10
With debt/GDP around unity, a substantial risk premium can be the difference between the debt load being "sustainable" and "unsustainable."
Bio/Vote History
         
Thaler Richard Thaler Chicago Agree 3
Yes I suppose so, but what of it?
Bio/Vote History
         
Udry Christopher Udry Yale Agree 3
Bio/Vote History
         
Zingales Luigi Zingales Chicago Strongly Agree 6
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

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