Series: IMF Working Papers
Author(s): Huixin Bi , Wenyi Shen , and Shu-Chun Susan Yang
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 03 May 2019
Keywords: Economic growth, Business cycles, Capital income, Real interest rates, Interest rate increases, interest rate normalization, monetary and fiscal policy interaction, fiscal sustainability, non linear DSGE models, New Keynesian model
This paper studies the main channels through which interest rate normalization has fiscal implications in the United States. While unexpected inflation reduces the real value of government liabilities, a rising pol...