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Government debt service, interest rates, and macroeconomic stability: a conceptual approach

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  • Richard J. CEBULA

    (University of Tennessee, United States of America)

  • G. Jason JOLLEY

    (Ohio University, United States of America)

  • Kamal P. UPADHYAYA

    (University of New Haven, United States of America)

  • Franklin G. MIXON Jr.

    (Columbus State University, United States of America)

Abstract

The U.S. national debt exceeded $1 trillion, driven by COVID-19 spending and military conflicts. Debt service payments rose 80.4% in four years, from $521 billion to $940 billion. This paper presents a macroeconomic model analyzing the monetary policy’s impact on debt service and national debt growth. Federal spending is divided into real expenditures on goods/services and interest-sensitive debt payments. The model suggests that if the interest sensitivity of debt payments surpasses that of household/business spending, expansionary monetary policy results in a negative macroeconomic multiplier, posing significant challenges for policymakers amidst growing debt service obligations.

Suggested Citation

  • Richard J. CEBULA & G. Jason JOLLEY & Kamal P. UPADHYAYA & Franklin G. MIXON Jr., 2025. "Government debt service, interest rates, and macroeconomic stability: a conceptual approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(643), S), pages 121-128, Summer.
    • Handle: RePEc:agr:journl:v:xxxii:y:2025:i:2(643):p:121-128
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