Debra Bloch

Government debt indicators: Understanding the data

There is no single “best” indicator for analyzing general government debt. This paper examines the various issues in defining and measuring debt, and explores other data which could be useful, both within and beyond the general government debt concept, to better track and analyze fiscal risks and sustainability issues. Measures from the broadest view of debt — gross financial liabilities — to the most comprehensive accounting of asset and liability positions — net worth — are all helpful metrics. Narrower data on specific issues such as future pension liabilities, government guarantees and debt composition are useful indicators as well. Better data reporting, including more complete metadata and broader data collection are needed to allow for an arsenal of comparable debt concepts to better anticipate future fiscal pressures.

The deterioration of the public spending mix during the global financial crisis

New indicators measuring the effects of public spending on inclusive growth have been constructed using recent empirical work by Fournier and Johansson (2016) and a recent public finance dataset (Bloch et al., 2016). A first set of indicators combines information on the mix of public spending. Each spending item share is multiplied with an estimated coefficient from growth and inequality equations to build both a growth and an income distribution component, which is then summed up to an aggregate inclusive growth indicator. The spending mix analysis cannot, however, measure the effectiveness of public spending within individual spending items, which is difficult to observe in a comparable manner across countries. A second set of indicators attempts to at least partly overcome this limitation by including information on the size and perceived effectiveness of governments. The average of the spending mix indicator and the size and effectiveness indicator provides an indicative overall indicator on the effects of public spending on inclusive growth. The analysis suggests that countries with a counter-cyclical fiscal stance typically have a public spending structure that is more supportive of inclusive growth. There is also a striking link between the growth component of the public spending mix indicator and the output gap: the capacity of the public finances to support inclusive growth deteriorated markedly in the countries hardest hit during the recent crisis.