Debt-to-GDP Ratio Is Increased by Unemployment, Stock Trading, and Inequality, Decreased by Inflation, and Unaffected by Interest Rates

Abstract

We demonstrate that the debt-to-GDP ratio is well predicted by five closely watched variables that include inflation. The Federal Reserve, economists, and stock market traders have recently expressed concern about the "the worst inflation in 100 years" (CNBC and Aljazeera, 20 May, 2022). Despite their semantic massage, we demonstrate that this outbreak occurred long after the time series studies here, indicating that inflation drove our debt-to-GDP ratios well before it broke out of control in 2022. This suggests that inflation may be an endemic and uncontrollable phenomenon. We contradict the growing concern about “the worst inflation in 100 years” by showing that inflation lowers the debt-to-GDP ratio. Our data driven discovery (DDD) shows that the debt-to-GDP ratio, acting as a dependent variable, is increased by unemployment, stock trading, and inequality, decreased by inflation, and unaffected by interest rates, all acting as independent variables.