The Trilemma for Low Interest Rate Macroeconomics

Jean-Baptiste Michau

No 2022-19, Working Papers from Center for Research in Economics and Statistics

Abstract: Three desirable goals of macroeconomic policy are: full employment, low inflation, and a low debt level with no Ponzi scheme. This paper shows that, when the natural real interest rate is persistently depressed, at most two of these three goals can be simultaneously achieved. Depending of the parameters of the economy, each of the three possibilities can be the preferred option, resulting in a non-trivial policy trilemma.

Keywords: Liquidity trap; Ponzi scheme; Secular stagnation. (search for similar items in EconPapers)
JEL-codes: E12 E31 E63 H63 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-09-27
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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