A surge in borrowing worldwide – private sector from 2019 and public sector from 2020 – may herald the beginnings of a global savings shortage. If so, a latent increase in the natural rate of interest (r*) may be underway – a potential game-changer for fiscal and monetary policy.
The advanced economies pre-Covid
One major, but underappreciated, force in advanced economies (AEs) holding down r* after the global financial crisis (GFC) was that the private sector limited its borrowing despite
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