• DOI:10.1209/0295-5075/90/38006
• Corpus ID: 15161876

Scale-Invariant Properties of Public-Debt Growth

@article{Petersen2010ScaleInvariantPO,
  title={Scale-Invariant Properties of Public-Debt Growth},
  author={Alexander Michael Petersen and Boris Podobnik and Davor Horvatic and Harry Eugene Stanley},
  journal={ERN: Economic Growth (European Economics) (Topic)},
  year={2010}
}

• A. Petersen, B. Podobnik, +1 author H. Stanley
• Published 12 February 2010
• Economics
• ERN: Economic Growth (European Economics) (Topic)

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 R, a proxy for default risk, and approximate the probability density function P(R) with a Gamma distribution, which can be used to establish thresholds for sustainable debt. We also observe "convergence" in R: countries with initially small R increase their R more quickly than countries with initially large R. The scaling relationships for debt and R have practical applications, e.g. the Maastricht Treaty requires members of the European Monetary Union to maintain R