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Fiscal sustainability in the aftermath of the great pause

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  • Rogoff, Kenneth

Abstract

Faced with a global natural catastrophe, countries must spend to deal with the immediate crisis, and to reduce longer-term economic scarring. Sustained infrastructure and education spending can help counter headwinds to the long-term outlook. However, the fact that government borrowing rates are at extremely low levels does not imply that the very high debt, especially short-term borrowing, is a free lunch. Real borrowing rates are likely below long-term trend, and there is no guarantee that any future adverse shock can only lower interest rates. Massive underfunded old-age transfer and support programs are a form of hidden non-market “junior” debt.

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  • Rogoff, Kenneth, 2021. "Fiscal sustainability in the aftermath of the great pause," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 783-793.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:4:p:783-793
    DOI: 10.1016/j.jpolmod.2021.02.007
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    2. Andersson, Fredrik N. G. & Jonung, Lars, 2022. "The Risks of Adopting the Bond Yield as the Anchor for the EU Fiscal Framework," Working Papers 2022:1, Lund University, Department of Economics.
    3. Cao, Hongjie & Li, Meina & Lu, Yuqi & Xu, Yang, 2022. "The impact of strengthening government auditing supervision on fiscal sustainability: Evidence from China's auditing vertical management reform," Finance Research Letters, Elsevier, vol. 47(PB).
    4. König, Jörg, 2022. "Europas Schuldenproblem: Wie sich der gordische Knoten lösen lässt," Argumente zur Marktwirtschaft und Politik 164, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.

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    Keywords

    Debt; Interest rates; Growth;
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