Join our interesting discussion with Prof. Thiess Buettner, Chairman of the Independent Advisory Board of the German Stability Council, about fiscal policy challenges in Germany.

Countries across Europe and the United States have witnessed a significant surge in government debt and interest rates in the aftermath of the Covid-19 pandemic. Join us as we engage in a conversation with Vítor Gaspar, Director of the IMF's Fiscal Affairs Department, about possible stability risks confronting government finances and the need to manage these risks.

The neutral rate is relevant for understaning the stance of monetary policy and for the fiscal outlook, as it determines the financing conditions for government debt. We explain how the neutral rate is defined, discuss its economic determinants and provide estimates of how it has changed since the pre-pandemic period. Increased government debt supply appears to have excerted substantial upward pressure on the neutral rate.

We make reference to the following papers:

Thiago Ferreira and Samer Shousha titled “The supply of safe assets and global interest rates” , Journal of International Economics, 2023.

Atif Mian, Ludwig Straub, and Amir Sufi. titled “What explains the decline in r*? Rising income inequality versus demographic shifts.” Proceedings of the Jackson Hole Symposium, 2021.