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That was not the route Skidelsky took. Instead, in his critique of a commentary by Kenneth Rogoff, he argued that it is silly and passe for a country that can issue debt in its own currency to fret over medium-term debt levels. On this score, Skidelsky confuses two different papers on debt and growth, a 2012 paper of mine, in which there were some alleged data concerns, with one that I co-authored with Rogoff and Vincent Reinhart, in which there were none.As Skidelsky notes, debts have risen significantly in the U.K. and the U.S. (among others) since 2008, while interest rates have remained low or declined. Should we therefore conclude that high debt is not linked to low growth via high interest rates (which crowd out private spending)?In 23 of these high-debt episodes, growth was lower, and in eight growth slowed even as real interest rates remained about the same or edged lower. Japan's debt overhang (entirely domestic currency debt), which we trace back to 1995, illustrates this pattern.High debt levels can and do constrain a country's abilities to cope with adverse events.The approach to unwinding current debts is likely to vary considerably across countries, but it is time to place greater emphasis on debt restructuring than on accumulating more debt.
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