The discussion about low interest rates and appropriate debt rules gained renewed impetus after Olivier Blanchard’s 2019 presidential address to the American Economic Association. Interest rates are persistently below growth rates in most advanced economies, including euro area sovereigns. Under these conditions, could an active use of fiscal policy lead to a more stable growth rate? What are the main impediments to a more active fiscal policy? How much leeway do the fiscal authorities in the euro area have to follow counter-cyclical fiscal policies aimed at providing some stimulus to the economy? With interest rates much below growth rates, should concerns about debt sustainability in Europe be put to rest?
In our latest Forum, Carl Christian von Weizsäcker, Ángel Ubide, Paul De Grauwe, Yuemei Ji and Yoshiyasu Ono consider private wealth, Golden Rules, animal spirits and the Japanese model as they provide their answers to the questions surrounding this extremely timely topic.
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