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Concluding Remarks on Economic Policy

In: Saving and Investment in the Twenty-First Century

Author

Listed:
  • Carl Christian von Weizsäcker

    (Max Planck Institute for Research on Collective Goods)

  • Hagen M. Krämer

    (Karlsruhe University of Applied Sciences)

Abstract

The German debt brakeDebt brake is not compatible with the long-term stability of the euroEuro. “New thinking” requires that public debt and price stability are no longer opponents, but rather allies in the Keynes worldKeynes world of persistently low interest rates. The proposed balanced account agreement is made more concrete here: An appropriate target (real) interest rate on the global capital market is between one and 1.5% per year lower than the growth rate of the OECD plus ChinaChina region. If the actual interest rate is below the target rate, the countries with current account surpluses undertake to increase their public debt periodPublic debt period D gradually according to a definite formula. In symmetrical fashion, if the real interest rate is “too high,” countries with current account deficits have the duty to reduce their public debt periodPublic debt period. The rules of the balanced account agreement replace the debt brakeDebt brake. They are the instruments of soundPolicy, fiscal fiscal policyFiscal policy.

Suggested Citation

  • Carl Christian von Weizsäcker & Hagen M. Krämer, 2021. "Concluding Remarks on Economic Policy," Springer Books, in: Saving and Investment in the Twenty-First Century, chapter 0, pages 309-320, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-75031-2_13
    DOI: 10.1007/978-3-030-75031-2_13
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