Perhaps the deflationary forces that have led to the trend declines in nominal and real interest rates over recent decades may abate and even reverse in the future.
One of us is writing a book on The Great Demographic Reversal (Palgrave Macmillan, London, 2020), forthcoming soon, to argue that this will happen.
But if not, how can we square the inconsistent objectives of maintaining interest rates low enough to maintain macroeconomic equilibrium without at the same time encouraging debt accumulation, fragile financial markets and an inefficient allocation of resources?
This is a question we need a good answer to.
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