Debt Sustainability in a Low Interest Rate World

Dmitriy Sergeyev and Neil Mehrotra

No 15282, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Conditions of secular stagnation—low output growth g and low interest rates r—have counteracting effects on the cost of servicing public debt, r − g. Using data for ad- vanced economies, we document that r is often less than g, but r − g exhibits substan- tial variability over the medium-term. We build a continuous-time model in which the debt-to-GDP ratio is stochastic and r

Keywords: Secular stagnation; Public debt; Debt sustainability; Low interest rates; Government default (search for similar items in EconPapers)
JEL-codes: E43 E62 H68 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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