Government debt reduction boosts economy during financial crises, study finds.
The article explores how to manage a situation where interest rates are very low and the government needs to stimulate the economy. It suggests that when interest rates are stuck at a low level, it's best for the government to temporarily reduce its debt. This can help boost economic output by making it cheaper for people to borrow money. The study also shows that when interest rates are not at their lowest, the government should increase its debt to prepare for the possibility of rates dropping again. This can help keep inflation stable.