Goverment Debt Post COVID-19: Back To Golden Rules

Christian Breuer ()
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Christian Breuer: ZBW-Leibniz Information Centre for Economics

No 41, Chemnitz Economic Papers from Department of Economics, Chemnitz University of Technology

Abstract: The COVID-19 crisis has caused public debt to increase dramatically, which is why the German and European fiscal rules are currently suspended. In addition to the new assessment of the fiscal costs at low interest rates (r<g), the discussion on the reintroduction of fiscal rules in Germany and Europe should take into account the function of government bonds as a safe asset and an instrument to combat the liquidity trap as well as the net return on productive government investments. For practical reasons, the return to the classic Golden Rule, which aims to limit net debt and promote government investment in the interest of future generations, is recommendable.

Keywords: Government Debt; Fiscal Rules; Low Interest Rates (search for similar items in EconPapers)
JEL-codes: E62 H56 H63 (search for similar items in EconPapers)
Pages: 5 pages
Date: 2021-02, Revised 2021-02
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Published in Chemnitz Economic Papers, February 2021, pages 1-5

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https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/CEP041_Breuer.pdf First version, 2021 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tch:wpaper:cep041

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