Publication: When interest rates go low, should public debt go high?
When interest rates go low, should public debt go high?
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Brumm, J., Feng, X., Kotlikoff, L. J., & Kubler, F. (2023). When interest rates go low, should public debt go high? (No. 28951; NBER Working Paper Series). https://doi.org/10.3386/w28951
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Is deficit finance, explicit or implicit, free when borrowing rates are routinely lower than growth rates? Specifically, can the government make all generations better off by perpetually taking from the young and giving to the old? We study this question in simple closed and open economies and show that achieving Pareto gains requires implausible calibrations. Even then, the gains reflect, depending on the economy's openness, improved intergenerational risk-sharing, improved international risk-sharing, and beggaring thy neighbor – not
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Brumm, J., Feng, X., Kotlikoff, L. J., & Kubler, F. (2023). When interest rates go low, should public debt go high? (No. 28951; NBER Working Paper Series). https://doi.org/10.3386/w28951
