3 How is public debt usually reported?
There are two common ways to report on the level of public debt of a particular country. One way is to simply report the current value of total public debt, measured in units of the country’s currency or converted into another currency, for example euros or dollars.
In the app below, you can explore the development of this measure of public debt for different countries over time. The app’s quick guide provides more context. Take a moment to explore the data and then return to the course.
A first look at the data: In this app you can have a look at the total amount of outstanding government debt for different countries over time.
When examining the data in the app above, you may have noticed that the absolute value of total public debt is rising in many countries over the long term. But is ever-increasing debt generally problematic from an economic perspective? Let us briefly consider whether the total amount of outstanding debt is a good measure of the debt burden of a given country.
To this end, it is important to look at government debt from a relative perspective. When an economy grows, an increase in the absolute value of the debt does not necessarily mean that the debt burden increases in relative terms. For example, if the economy grows faster than debt, the size of public debt actually decreases relative to the size of the economy or of the governments ability to service the debt.
On of the most used measures of the relative debt burden of an economy is the debt-to-GDP ratio, which compares the absolute value of government debt with gross domestic product, or GDP, which is measure of the size of the particular economy.3
In the next step, we therefore look at the public debt-to-GDP ratio.