Paper #1184

Title:

Debt sustainability in historical perspective: The role of fiscal repression

Authors:

Joachim Voth and Mauricio Drelichman

Date:

May 2008

Abstract:

This article examines the debt history of two contenders for European hegemony: 16th-century Spain and 18th-century Britain. We analyze their fiscal behavior using measures of overborrowing and fiscal policy functions. Our results suggest that stringency was not key for Britain’s success in avoiding default. Instead, fiscal repression allowed the United Kingdom to borrow at below-market rates, thereby outspending its continental rivals.

JEL codes:

JEL: E4, F41, N23

Area of Research:

Economic and Business History

Published in:

Journal of the European Economic Association, April-May 2008, 6 (2-3), pp. 657-667

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