Macro Framework
When national debt-to-GDP surpasses 120%, real GDP growth rates compress by an average of 1.2% due to capital crowding-out and rising debt servicing burdens.
1. Sovereign Debt-to-GDP Mechanics & Fiscal Dominance
Fiscal dominance occurs when monetary authorities cannot hike interest rates to curb inflation without triggering sovereign debt refinancing crises.
2. Central Bank Liquidity Swap Lines
Bilateral currency swap lines maintained by the Federal Reserve ensure international US Dollar liquidity stability during systemic banking stress.