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Goverment Debt Post COVID-19: Back To Golden Rules

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  • Christian Breuer

    (ZBW-Leibniz Information Centre for Economics)

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, 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.

Suggested Citation

  • Christian Breuer, 2020. "Goverment Debt Post COVID-19: Back To Golden Rules," Chemnitz Economic Papers 041, Department of Economics, Chemnitz University of Technology, revised Feb 2020.
    • Handle: RePEc:tch:wpaper:cep041
    as

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    References listed on IDEAS

    as
    1. Olivier Blanchard, 2019. "Public Debt and Low Interest Rates," American Economic Review, American Economic Association, vol. 109(4), pages 1197-1229, April.
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    4. Robin Brooks & Jonathan Fortun, 2020. "Eurozone Output Gaps and the COVID-19 Shock," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(5), pages 291-296, September.
    5. repec:aei:rpaper:1008582820 is not listed on IDEAS
    6. Olivier J Blanchard, 2019. "Public Debt: Fiscal and Welfare Costs in a Time of Low Interest Rates," Policy Briefs PB19-2, Peterson Institute for International Economics.
    7. Achim Truger, 2020. "Reforming EU Fiscal Rules: More Leeway, Investment Orientation and Democratic Coordination," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(5), pages 277-281, September.
    8. European Fiscal Board (EFB), 2020. "2020 annual report of the European Fiscal Board," Annual reports 2020, European Fiscal Board.
    9. Philipp Heimberger, 2020. "Potential Output, EU Fiscal Surveillance and the COVID-19 Shock," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(3), pages 167-174, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Government Debt; Fiscal Rules; Low Interest Rates;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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