Monetary Expansion and Public Debt/GDP. Comparative Analysis USA - Euro Area

Research Paper (postgraduate) from the year 2026 in the subject Economics - Other, grade: Q1, , language: English, abstract: This study analyses the evolution of the monetary aggregates Monetary Aggregate M2 (M2) and public debt/Gross Domestic Product (GDP) ratios in the United States and the Euro Area in the period 1999–2025, using time series normalized with base year 1999 = 100%. The quantitative analysis, based on official data from Federal Reserve Economic Data (FRED), European Central Bank (ECB), Eurostat and the US Treasury, reveals surprisingly parallel dynamics between the two economies, with dramatic accelerations during the 2008 financial crisis and the 2020 pandemic crisis. The US M2 aggregate grew by 383.5% in 26 years (Compound Annual Growth Rate (CAGR) 6.25%), while the Euro Area recorded an increase of 310.9% (CAGR 5.59%). The US Debt/GDP ratio more than doubled, rising from 59.3% to 122.0%, compared to more contained growth in the Euro Area (from 71.6% to 88.5%). The most significant figure is the monetary explosion of 2020: US M2 increased by 25% in a single year (about $4,000 billion), highlighting the unprecedented impact of extraordinary Quantitative Easing (QE) policies. The analysis also documents the post-pandemic divergence in policy strategies: while the Euro Area has, since 2022, initiated a path of fiscal consolidation and aggressive Quantitative Tightening (QT), the United States maintains debt levels stably above 120% of GDP. The results suggest that the monetary and fiscal policy choices of the 2020–2023 period have rewritten macroeconomic paradigms, with profound implications for the sustainability of sovereign debt and global financial stability. The study also provides empirical validation of the data through comparison with OECD and scenarieconomici.com sources, confirming an accuracy of 93.75% (15 out of 16 values within a 5% tolerance threshold).