Optimal Government Debt Dynamics: Lessons from the Literature
The Week That Was in Europe
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Optimal Government Debt Dynamics
The chapter discusses the optimization of government debt dynamics in response to varying interest rates, COVID pandemic impacts, and inflationary shocks. It explores the benefits of minimizing debt to reduce refinancing risk and tax distortions, as well as the potential advantages of negative debt levels for financing public goods without raising taxes. The chapter delves into optimal debt reduction strategies based on government debt levels, tax volatility, and costs associated with reducing debt.
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