Fiscal r-star sits where two research traditions meet: the natural-rate literature that gives us monetary r-star, and the debt-sustainability literature that asks when public debt is stable. This page maps that lineage and collects the work the framework builds on.
21 works
The framework
The fiscal r-star framework
The paper that defines the measure, plus its short-form and policy-brief versions.
Bolhuis, Koosakul & Shenai2024
Fiscal R-Star: Fiscal-Monetary Tensions and Implications for Policy
Defines fiscal r-star as the real interest rate that stabilizes debt when the primary balance is set exogenously, output grows at potential, and inflation is at target. Proposes the difference between monetary r-star and fiscal r-star, the fiscal-monetary gap, as a proxy for tensions between the two authorities. Using 140 years of data for 16 advanced economies, it finds tensions at highs not seen since World War II.
Mind the gap: Gauging fiscal-monetary tensions through fiscal r-star
VoxEU / CEPR column, 29 September 2024
columnfiscal-monetary gap
The short-form column version of the framework, carrying the headline result that fiscal-monetary tensions across 16 advanced economies now sit at levels last seen during the Second World War.
R Star Star Wars Episode II: Fiscal Policy Strikes Back
Financial Times, 2024
op-edfiscal-monetary gap
The authors' Financial Times piece bringing fiscal r-star to a general finance readership, casting it as the fiscal entrant in the long-running r-star debate.
Marijn Bolhuis on Fiscal R-Star and its Implications for Macroeconomic Policy
Macro Musings (Mercatus Center), 6 January 2025
interviewpodcast
A long-form interview with David Beckworth walking through the framework: monetary versus fiscal r-star, the fiscal-monetary gap, active versus passive policy, and why estimated tensions now sit at postwar highs.
One half of the gap: the real rate consistent with stable prices, from Wicksell to the modern state-space estimates.
Wicksell1898
Interest and Prices (Geldzins und Güterpreise)
Macmillan (1936 English translation)
natural ratefoundational
The origin of the natural rate of interest, the rate consistent with stable prices, which the modern monetary r-star literature later made operational and estimable.
Laubach & Williams2003
Measuring the Natural Rate of Interest
Review of Economics and Statistics, 85(4)
monetary r-starestimation
The workhorse state-space estimate of monetary r-star for the United States, and the empirical anchor for one side of the fiscal-monetary gap.
Holston, Laubach & Williams2017
Measuring the natural rate of interest: International trends and determinants
Journal of International Economics, 108
monetary r-starcross-country
Extends the r-star estimate across advanced economies, supplying the cross-country monetary r-star series that the gap is measured against.
Debt dynamics
Debt sustainability and fiscal reaction functions
The other half: when the primary balance keeps debt on a stable path, and the r versus g arithmetic behind it.
Domar1944
The “Burden of the Debt” and the National Income
American Economic Review, 34(4)
debt dynamicsr vs gfoundational
The original statement of debt dynamics under growth, and the r versus g intuition at the core of any debt-stabilizing rate.
Bohn1998
The Behavior of U.S. Public Debt and Deficits
Quarterly Journal of Economics, 113(3)
fiscal reaction functionsustainability
Introduces the fiscal reaction function: the empirical test of whether the primary balance responds enough to rising debt to keep it on a sustainable path.
r minus g
Public debt at low interest rates
The debate over what persistently low rates mean for the cost and safety of public debt.
Blanchard2019
Public Debt and Low Interest Rates
American Economic Review, 109(4). AEA Presidential Address
r vs gwelfare cost of debt
Argues that when r is below g the fiscal and welfare costs of public debt may be small, reframing the debt-sustainability debate around persistently low rates.
Mauro & Zhou2021
r minus g negative: Can We Sleep More Soundly?
IMF Economic Review, 69
r vs grollover risk
Tempers the optimistic reading of low rates by showing that r minus g can turn positive sharply and with little warning, especially around crises.
Mehrotra & Sergeyev2021
Debt sustainability in a low interest rate world
Journal of Monetary Economics, 124S
sustainabilitylow rates
Models debt sustainability when rates are persistently low but uncertain, a direct antecedent to reasoning about a debt-stabilizing rate.
Policy regimes
Active, passive, and the fiscal theory of the price level
The taxonomy of fiscal and monetary dominance that frames what tension between the two authorities means.
Leeper1991
Equilibria under “active” and “passive” monetary and fiscal policies
Journal of Monetary Economics, 27(1)
active/passivepolicy interaction
The active versus passive taxonomy that underlies the distinction between fiscal and monetary dominance, and cited directly in the fiscal r-star paper.
Sims1994
A simple model for the study of the determination of the price level and the interaction of monetary and fiscal policy
Economic Theory, 4(3)
FTPLprice level
An early statement of the fiscal theory of the price level, where the price level adjusts so that real debt equals the present value of future surpluses.
Woodford2001
Fiscal Requirements for Price Stability
Journal of Money, Credit and Banking, 33(3)
FTPLprice stability
Sets out the conditions fiscal policy must satisfy for a monetary regime to deliver price stability.
Cochrane2023
The Fiscal Theory of the Price Level
Princeton University Press
FTPLsynthesis
The book-length synthesis of the fiscal theory, and the fullest account of the fiscal-monetary interaction the framework sits within.
Fiscal space
Fiscal space, debt limits, and fiscal fatigue
How far a fiscal position can be pushed before the primary balance can no longer keep pace.
Ghosh, Kim, Mendoza, Ostry & Qureshi2013
Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies
The Economic Journal, 123(566)
fiscal spacedebt limitfiscal fatigue
Introduces fiscal fatigue and a debt limit beyond which the primary balance can no longer keep pace with debt, a natural complement to a debt-stabilizing rate.
Mendoza & Ostry2008
International evidence on fiscal solvency: Is fiscal policy “responsible”?
Journal of Monetary Economics, 55(6)
solvencycross-country
Cross-country evidence on whether primary balances respond to rising debt, extending Bohn's reaction-function test internationally.
Repression
Financial repression and the debt-inflation nexus
The channels, low real rates and inflation, through which the real burden of debt is eroded.
Reinhart & Sbrancia2015
The Liquidation of Government Debt
Economic Policy, 30(82)
financial repressionreal rates
Documents how low or negative real rates quietly erode the real value of public debt, the financial-repression channel the gap is associated with.
Reinhart & Rogoff2009
This Time Is Different: Eight Centuries of Financial Folly
Princeton University Press
debt historycrises
The long-run history of debt, default, and inflation that motivates measuring fiscal stress over very long samples.