Gita Gopinath

So those have been the typical paths.

We've never had to worry about debt crises in developed economies.

But now more and more, and I think this is also a new feature of the world we live in, is the developed world is moving into that space where their debt costs and their borrowing costs are far more volatile, far more sensitive to market conditions.

I mean, the stock case is the UK, where you see that on a day-to-day basis.

But, you know, you see that in other countries, too, in Europe and some of it in France and more generally, even Japan, where for the longest time we didn't have to worry about borrowing costs.

Those have squarely moved up.

The tenure rates have moved up.

You know, Germany's tenure rates have moved up.

So everywhere we are seeing developed economies also now having to face higher borrowing costs.

The U.S., I think, is still...

the exception in the sense that even though 10-year yields are at, say, 4.5% right now, just given the level of supply of debt and what's expected to come out in the future, markets are still treating it as giving it some privilege, even if it was not as big as it used to be in the past.

A crisis in a developed economy would look more like a credit crunch that then leads into a financial crisis.

So we would see a sharp increase

in borrowing costs that will affect many other asset classes.

You would see a slump in investment, the economy.

So it's this debt overhang, the high levels of debt and that you have to roll over on a daily basis, that overhang, which slows growth, slows dynamism.

That is what a typical crisis looks like.

And yes, you can have financial crisis.

One of the wonderful things about the last several years is despite all the shocks, we haven't had a financial crisis in the developed world or in any emerging market, any big emerging market.

And that has been very helpful to bring back a fast recovery of the world economy every time after every shock.