The best source of annual debt-to-GDP ratios that are reasonably comparable across (many) countries is probably the World Economic Outlook (WEO) of the IMF. In the WEO database, we can obtain both the actual data and some forecast, which is always interesting to see, but I guess of little practical use beyond “next year.” There are also several other variables, not only regarding public finances.

In this picture, I compared my benchmark countries –Australia, USA, and China-  with the Euroarea (EA) countries that arguably suffered the most during the EU debt crisis, and 3 “control” countries in Europe, i.e. Germany, France, and a EA average (also from the IMF WEO). I use Gross Debt as a percentage of GDP.

Students often ask about PIIGS (Portugal, Ireland, Italy, Greece, and Spain). As a citizen of one of the PIIGS, this acronym infuriates me. In the past, I have preferred to use the acronym GIIPS, instead, but then where is Cyprus in the GIIPS?  See?  No room in PIIGS for Cyprus! Cyprus, albeit a small country, is another EA member that went through sovereign debt hell after 2009. It makes an excellent “case study,” if one structures his/her class with tutorials or analogous time blocks.

Cyprus + 5 GIIPS + 6 control countries gives a nice 3×4 matrix of cute little graphs between 2006 and 2016. I only label initial and end point in 2006 and 2016 to keep the charts clean, and I fill the background of the Australia, USA, and China charts in a different color, to distinguish them visually. In the attached file, I retrieved the data from the IMF and WEO directly but also tried to set up an easy download from Fred using the Fred Excel add-in. Unfortunately, Cyprus and EA don’t have the same series in Fred II as in the WEO; no clue why.

What to make of this?

  1. General trend: up, at least since the incipit of the GFC;
  2. The GIIPS/C do not necessarily stand out, which is a good opener to explain the reasons why these countries suffered sovereign debt crises;
  3. Greece shows clearly (though not as sizeably as one would expect) its debt restructuring;
  4. Ireland’s dramatic increase since 2007-ish has been largely reversed but this is a fairly unique case;
  5. general stabilization across these countries around 2014-16.
  6. Sidenote: Australia has a quite impressive upward trend, it may deserve its own post at some point.

Link to the background

Tip for teaching: As some students have the same attention span I have when I watch baseball on TV, here’s something I do quite often: project a “blank” graph and have them guess. I start from having them guess the United States, and then Ireland, and then Greece. They never get the United States right…


Another blog post: This is something I wrote about debt and deficit in three large advanced economies (Japan, USA, and EU) a while ago:  Debt- and Deficit-to-GDP dynamics during the Global Financial Crisis using the Fred graphs’s format (that may or may not work for one’s individual teaching).