Logo eprints

Scale-invariant properties of public-debt growth

Petersen, Alexander M. and Podobnik, Boris and Horvatic, Davor and Stanley, H. Eugene Scale-invariant properties of public-debt growth. EPL (Europhysics Letters), 90 (3). p. 38006. ISSN 0295-5075 (2010)

Full text not available from this repository.


Public debt is one of the important economic variables that quantitatively describes a nation's economy. Because bankruptcy is a risk faced even by institutions as large as governments (e.g., Iceland), national debt should be strictly controlled with respect to national wealth. Also, the problem of eliminating extreme poverty in the world is closely connected to the study of extremely poor debtor nations. We analyze the time evolution of national public debt and find "convergence": initially less-indebted countries increase their debt more quickly than initially more-indebted countries. We also analyze the public debt-to-GDP ratio {\cal R} , a proxy for default risk, and approximate the probability density function P({\cal R}) with a Gamma distribution, which can be used to establish thresholds for sustainable debt. We also observe "convergence" in {\cal R} : countries with initially small {\cal R} increase their {\cal R} more quickly than countries with initially large {\cal R} . The scaling relationships for debt and {\cal R} have practical applications, e.g. the Maastricht Treaty requires members of the European Monetary Union to maintain {\cal R} < 0.6 .

Item Type: Article
Identification Number: 10.1209/0295-5075/90/38006
Additional Information: PACS: 89.65.Gh Economics; econophysics, financial markets, business and management; 89.90.+n Other topics in areas of applied and interdisciplinary physics (restricted to new topics in section 89); 89.75.Da Systems obeying scaling laws
Subjects: H Social Sciences > HB Economic Theory
Q Science > QC Physics
Research Area: Economics and Institutional Change
Depositing User: Alexander Petersen
Date Deposited: 04 Jul 2011 09:21
Last Modified: 06 Apr 2016 08:01
URI: http://eprints.imtlucca.it/id/eprint/268

Actions (login required)

Edit Item Edit Item