Debt levels and flows

Debt is used to finance and pay for entreprises and business around the world. The levels of debt – how much debt is outstanding – and the flows of debt – how much the level of debt changes over time – are basic macroeconomic data, and vary between countries.

Within mainstream economics, levels and flows of public debt (government debt) are a cause of concern, while levels and flows of private debt (especially households and corporations) are not seen as being of central importance.

Measuring debt

In measuring debt, stocks and flows are both of interest: stocks are amounts, levels of debt (e.g., $100) and have units of currency (such as US Dollars), while flows are changes in levels – in calculus terms, the derivative – (e.g., $10/year), and have units of currency/time (such as US Dollars/Year).

In order to make these stock and flows comparable between countries and across time, one may normalize these by some measure of the size of the country's economy, most often GDP, that is, compute the debt to GDP ratio. For instance, $10 billion in 2000 is a small amount of debt relative to the size of the economy of the United States, but large relative to the size of the economy of Iceland, and dividing by the GDP reflects this.