The stability of the ratio of non-financial debt to income



The theoretical framework of monetary policy is based on a set of assumptions which have often been criticised. In particular, the relative stability of the ratio of money and of domestic non-financial debt to national product is a crucial factor affecting the choice of monetary instrument. Recent research has shown these ratios to have been remarkably constant in the postwar period in the United States. However, evidence is presented in this article for a number of other countries which, it is argued, refutes the US evidence.


JEL: E52, H63


Monetary policy, non-financial debt, ratios

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