Fiscal #Sustainability in #Europe: Is R < G?

European governments have become accustomed to running persistent primary deficits. This is only sustainable for debt dynamics if interest rates R are below the economy's growth rate G. We check if R < G was satisfied over the past 20 years and the discuss the outlook for this relationship in the future.

Papers we mention in the podcast are:
Atif Mian, Ludwig Straub, and Amir Sufi. Forthcoming. “What explains the decline in r*? Rising income inequality versus demographic shifts.” Proceedings of the 2021 Jackson Hole Symposium.

Paul Schmelzing, "Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018", https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018