There are many different equations used to determine how economically sound a nation is, and one of these calculations is the debt-to-GDP ratio. This ratio measures a country's government debt compared to its gross domestic product (GDP) – or the value of all goods and services produced by the country.
The debt-to-GDP ratio is usually expressed as a percentage and is used to indicate whether or not a country can pay back its debts. If the ratio indicates that a nation cannot pay its government debts, there is a risk of default, which could wreak havoc on the markets.
As of December 2019, the nation with the highest debt-to-GDP ratio is Japan, with a ratio of 237%. In 1992, Japans's Nikkei (stock market) crashed. The government bailed out banks and insurance companies, providing them with low-interest credit. Banks were consolidated and nationalized, and other stimulus initiatives were used to help the struggling economy; however, these caused Japan's debt to increase dramatically.