Jason Choi, Duong Dang, Rishabh Kirpalani, Diego Perez
Despite exceeding 100% of GDP, US public debt is considered safe due to the country’s role as a safe global asset and reserve currency supplier. This column uses a model to quantify the additional debt capacity generated by this ‘exorbitant privilege’ status. It finds that the special status of the US increases maximal sustainable debt by around 22% of GDP, mostly due to debt being liquid and widely used as collateral. Overall, the US’s status in global financial markets is crucial for debt sustainability, and efforts by other countries to establish competing safe assets could pose challenges to the US’s dominant position.
Πηγή: Voxeu