[lbo-talk] Debt write offs and GDP

Wojtek Sokolowski sokol at jhu.edu
Fri Oct 31 07:31:54 PST 2003



> Does anyone one know how debt write offs affect GDP?
>

Good question. Since GDP = sum total of the incomes of all factors of production, or sum total of final outputs less intermediate consumption, and bad loan reduces the income of the capital (or adds to its intermediate consumption), that would mean that debt writeoff should decrease the GDP. However, I understand that most bad debts are sold to collection agencies etc. and that transaction feature on the income side, which adds to the GDP.

Any thoughts?

Wojtek



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