Macro Musings with David Beckworth Lukasz Rachel on Non-Ricardian Macroeconomic Policy and Its Implications for Inflation
Nov 17, 2025
Lukasz Rachel, a former Bank of England economist and current assistant professor at University College London, dives into the nuances of modern macroeconomic policy. He examines secular stagnation and its impact on R-star, revealing how demographic and public-sector trends shape interest rates. Lukasz also discusses non-Ricardian fiscal policy, arguing that it complicates monetary dynamics and can lead to inflation. He emphasizes the need for better coordination between fiscal and monetary policies to tackle these challenges effectively.
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Formative Start During 2008 Crisis
- Lukasz Rachel began his career at the Bank of England in late 2008 amid the global financial crisis.
- That timing made him witness productivity declines and shaped his long-term interest in R-star research.
Public Forces Masked Private R-Star Decline
- Public sector forces like rising debt and social spending pushed real rates up, offsetting private-sector declines.
- Combining these forces explains why observed rates fell less than private-sector trends implied.
Deep Negative R-Star Risks Secular Stagnation
- Deeply negative natural rates would leave monetary policy frequently constrained at the effective lower bound.
- That raises the risk of weaker recoveries and persistent low growth consistent with secular stagnation.
