High debt levels could destabilize economies, active fiscal policies crucial
The article explores how different types of government debt can impact economies with specific monetary and fiscal policies. It focuses on the U.S. and Japanese economies and finds that high levels and medium maturities of debt can lead to economic instability under certain policies. However, using fixed interest rates alongside active fiscal policies can maintain stability. This suggests that during times when interest rates are stuck at zero, changing fiscal strategies can be beneficial.