Fiscal Dominance and the Return of Zero-Interest Bank Reserve Requirements

Charles Calomiris

Review, 2023, vol. 105, issue 4, 223-233

Abstract: As a matter of arithmetic, the trends of US government debt and deficits will eventually result in an outrageously high government debt-to-GDP ratio. But when exactly will the United States hit the constraint of infeasibility and how exactly will policy adjust to it? This article considers fiscal dominance, which is the possibility that accumulating government debt and deficits can produce increases in inflation that "dominate" central bank intentions to keep inflation low. Is it a serious possibility for the United States in the near future? And how might various policies change (especially those related to the banking system) if fiscal dominance became a reality?

Keywords: government debt; government deficits; fiscal dominance; inflation (search for similar items in EconPapers)
JEL-codes: E52 E62 H63 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlrv:96299

DOI: 10.20955/r.105.223-33

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