Government debt service, interest rates, and macroeconomic stability: a conceptual approach
The U.S. national debt exceeded $1 trillion, driven by COVID-19 spending and military conflicts. Debt service payments rose 80.4% in four years, from $521 billion to $940 billion. This paper presents a macroeconomic model analyzing the monetary policy’s impact on debt service and national debt growt...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2025-06-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1835.pdf
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| Summary: | The U.S. national debt exceeded $1 trillion, driven by COVID-19 spending and military conflicts. Debt service payments rose 80.4% in four years, from $521 billion to $940 billion. This paper presents a macroeconomic model analyzing the monetary policy’s impact on debt service and national debt growth. Federal spending is divided into real expenditures on goods/services and interest-sensitive debt payments. The model suggests that if the interest sensitivity of debt payments surpasses that of household/business spending, expansionary monetary policy results in a negative macroeconomic multiplier, posing significant challenges for policymakers amidst growing debt service obligations. |
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| ISSN: | 1841-8678 1844-0029 |