Who will pay for the global recovery – and how?

Abstract

The economic costs of COVID-19 have by now been shown to be much larger than originally foreseen in the early days of the pandemic. Faced with a simultaneous and prolonged supply-side and demand-side shock, governments have gone to extraordinary lengths in order to avoid an overly heavy burden from the health crisis on households and businesses as well as to sustain and support an eventual economic recovery. This unprecedented fiscal expansion has pushed already high public deficits and debts even higher, in both advanced as well as emerging economies. We now live in a debt-heavy world; but will that debt have to be repaid, and how?