Neutral real interest rates have fallen by around 300 basis points “over the last generation”, despite offsetting action by fiscal authorities, Larry Summers and Łukasz Rachel say in a new paper.

The economists study why ballooning fiscal deficits, which would have been expected to raise real rates, failed to do so. They find that while neutral rates have fallen steadily in recent decades, the decline would have been much more rapid without action from the fiscal authorities, which raised the